Are Rents on the Rise?

In a period of uncertainty, we can never quite be sure of what’s to come for the UK rental market. But with recent talks of inflation, employers bringing staff back into the workplace, and an increasing demand for rental properties, we can certainly make predictions for what might happen next. 

Could rents be on the rise for the UK property market? 

In recent months, we’ve seen tenants have the ball in their court when it comes to rental prices. Because of the changing climate, tenants have had the power to negotiate their rents, with landlords granting rent reductions and sacrificing their profits in return for keeping reliable long-term tenants.  

London has seen some staggering rental decreases of late, with a high supply of rental properties and a lower market demand as tenants reconsider what they want from a home following the Covid-19 pandemic. Tenants have been migrating to the suburbs and rural areas seeking a better work life balance and a comfortable environment in which they can work from home. 

Low interest rates and stamp duty holiday causing a surge in sales 

There has been a surge in sales of UK buy-to-let properties, with many investors and first-time landlords being enticed by lower interest rates and the stamp duty holiday. Buy-to-let landlords have been taking full advantage of the extended tax cut, only having to pay the 3% stamp duty rate regardless of the purchase price.  

With more and more rental properties entering the market, tenants will have less room for negotiation as the supply of homes increases.  

Could inflation cause a further increase in rents? 

In addition to this, discussions regarding inflation have been circling around the media causing speculation as to whether rental prices will suddenly spike fairly shortly. As inflation goes up, so does the cost of living, and this includes rents. Not only do landlords need to increase rents over time to keep up with inflation, they may also experience a rise in their mortgage interest, thus increasing their monthly mortgage payments. And tenants are fearing a sudden spike in rents, with many procrastinating about whether they should be moving home in a somewhat volatile market.  

Companies cancelling work from home 

Some companies have been embracing their new normal with a new way of working, allowing their employees to work remotely for the foreseeable future. Other companies, on the other hand, such as tech giant Google, are bringing their staff back to their pre-Covid place of work sooner than originally anticipated. As reported by the BBC, Google employees received a letter last month announcing that they will be moving back to the office sooner than planned, and that they must live within commuting distances of their place of work.   

And it seems that Google are not alone: many other companies are hurrying to bring forward the return of their staff to the workplace. The sentiment around remote working seems to be changing as businesses opt to adapt their workplace with socially distanced measures and one-way systems, rather than continue with an adoption of the work from home model. 

With talks of companies wanting to bring their employees back into the workplace from June 2021, employees will be looking to relocate to be closer to their place of work. As tenants will be needing to move closer to their place of work, we could see a rise in the demand for rental properties, particularly in London.   

Could we see a steeper rise in rents in 2021? 

With the above factors soon to come into play, now might be a good time for tenants to lock in a new tenancy at a rental rate they are happy with, before any potential rent increases come into force. With rent negotiation still a viable option for tenants, it could be a good time to capitalise on what is currently a period of reduced rents.  

As the demand for rental properties goes up, and with inflation around the corner, there might be less room for negotiation when it comes to rental prices over the coming months. Rents could potentially rise fairly sharply, so in order to secure a reasonable long-term rent, tenants will want to get moving quickly.