Rental activity picks up post Brexit vote, dampening house sales

The UK's property rental market is overtaking the sales market following the Brexit vote, due to rising prices and a fall in the availability of homes, according to Countrywide.

The number of people renting is expected to be higher than those buying next year, the first time since the 1930s, as home-buyers struggle to find affordable properties, the UK real estate agency said in a report.

Research director Johnny Morris at Countrywide said: “As some would-be buyers and sellers sit on their hands, Brexit-induced uncertainty has continued to boost to the rental market. Overall this is yet to stoke rental inflation, but September saw record activity, with increasing numbers of lets agreed and tenants choosing to renew their contracts. On current trends, 2017 could be the first time since the 1930s that more homes are let than sold.”

Across six regions of the north of England and the Midlands, Rightmove said that the number of homes for sale had fallen by 11% since 2015, giving buyers less room to negotiate on price.

The rental website also pointed out the north-south divide in the housing market after the Brexit vote. It pointed out that activity in the north of England has picked up after the vote, becoming a “sellers’ market”.

Rightmove’s director Miles Shipside said: “After the referendum result and the usual summer slowdown, estate agents’ experiences appear to fall into one of two camps, with a definite north/south divide.”

Countrywide’s latest report, on the other hand, highlighted how the North-South divide has actually narrowed by 4.6%. Manchester is seeing the highest rental growth while Oxford, Cambridge and London is seeing largest slowdown.

“A different type of two speed rental market is emerging, with falling stock and growing demand
driving rental growth in many Northern cities at a higher rate than those in the South,” said Morris.

At a regional level the average rent in the North currently stands at £692 per month compared to £1,100 in the South.

Manchester has faced the highest increase in rent prices in the country at 7.1%, more than three times faster than the average.

York, Leeds, Liverpool and Glasgow follow on from Manchester in the top five cities facing rental growth over the last three months.

Oxford, Cambridge and London have the largest slowdown dropping five places from last year. In the capital, rents are rising fastest in the outer areas while central and inner London remain broadly unchanged compared to the previous period.

The estate agency attributed this slowdown to greater price sensitivity and a rise in the number of landlords cutting their asking price by two-fold. Cambridge saw the highest number of homes with a cut in asking rent at 18% in September, followed by London at 17%.

There was also a spike in the availability of rental homes after April’s stamp duty change, giving tenants more choice, and increasing competition among landlords.

Despite this, the gap between rents in the North and South remains 26% wider than it was in 2010.

“With London rents growing at the slowest rate since the downturn (2008) and Northern cities
recording rent rises three times as large as their Southern counterparts, there are signs that the
North-South rental divide is starting to close. Although at current rates it would take at least five
years for the gap between rents in the South and North to close back to 2010 levels,” said Morris.

On the plus side, the rate of rental growth has slowed across the country to 2.2% from 2.8% last September, which is the smallest September increase in four years.