A look back at 2016

In the 17 years I have been in the industry I cannot remember a single year where there were so many changes:

  • Right to Rent Act
  • Letting agents displaying fees
  • Energy Efficiency Standards
  • Selective licensing (HMOs)
  • Wear & Tear allowances
  • Section 24 of the Finance Act
  • Stamp Duty Land Tax increase to 3% for 2nd homes
  • Brexit

While it is hard to quantify exactly the positive or negative effect of the above in the present or future market we can look at national Rightmove data to give us an idea. Rightmove represents approximately 65% of the property portal market so their statistics can paint a pretty accurate picture:

Competitive market?

  • The Private Rental Sector has doubled in size from 9% to 18% since 2001
  • More than 1200 new Rightmove letting offices in last 3 years shown below
  • The majority of these are estate agents opening a lettings arm with few specialists like Bishop Sullivan remaining
  • This is a good indicator of the current market strength

RM office increase 2014-16

New instructions

  • New listings are classed as ‘new to market that month’ rather than ‘brand new’
  • You can see a surge of properties coming onto the market in Q2 following the rush to beat 01-APR SDLT increase to 3%
  • 2016 easily outstrips 2014 & 2015 supply levels

RM new listings

  • Following the graph below you can see double the average new instructions arriving on the market week 15 (11-APR) following rush to beat 01-APR SDLT increase
  • APR/JUN were strong months due to surge of instructions after 01-APR

RM weekly 2016 new listings

Where is the supply?

  • Year on Year Greater London sees the largest influx of property at nearly a 15% increase
  • This area represents 1/3 of all PRS properties in the UK so it is a significant figure
  • East of England, West Midlands, North East, North West and East Midlands are all showing low supply numbers

RM 2016 regional new listings

Available stock

  • Has this surge of properties in Q2 and better supply in general affected the market?
  • In the graph below Rightmove class an increase in Available Stock as properties taking longer to let
  • You can see the big dip in availability in AUG/SEP 2015 as the market hits the annual peak conditions
  • Following the influx of property from Spring 2016 it gradually takes longer to let property nationally
  • There is a dip in availability again in AUG 2016 as we enter peak market conditions again

RM available stock since Jan-15

Demand

  • Rightmove email and phone leads to letting agents are recorded and shown below
  • Q3s shows a spike each year due to the AUG/SEP busy period
  • Interestingly 2015 and 2016 showing similar applicant numbers rising to 6.75million in Q3

RM 2016 phone and email leads

Conclusion

So what does this all mean?

  • Well, we can see that supply is up in 2016
  • We can also see that demand is flat when compared to 2015
  • This could suggest a cooling of rent increases nationwide in 2017 (not necessarily locally of course)

What about Greater London’s 15% supply increase Year on Year you say?

  • Great London is the only area showing a drop in rent at -1.5%

Are there any opportunities in rest of UK?

  • Looking below East of England (4%), North West (3.75%), East Midlands (3.5%) and West Midlands (3.5%) are all showing a low supply as per the earlier graph and funnily enough are the areas showing the highest price change YOY, which may represent good areas to invest in:

RM geographical price change YOY

While there is no crystal ball you can see general patterns, especially what affect an increase or lack of supply has on rents nationally as well as peak market conditions.

Hopefully this will have been of use to you, feel free to contact me if you have any questions.


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Best Regards,

julian-sig

Julian Bishop