Rising Rents Are About Supply, Not Just Legislation
Another common concern ahead of the Renters’ Rights Act was that landlords would exit the market, reducing the supply of rental homes and driving rents up. While some landlords chose to sell in the run-up to implementation, the mass exodus many anticipated has not materialised. Instead, most have adapted to the new system, supported by good advice and a growing understanding of how the legislation works in practice.
Rental stock does, however, remain constrained in certain parts of the market. Some landlords who were already considering an exit have continued to bring properties to the sales market, with the new rules often acting as an additional factor rather than the sole reason for selling. That said, we’ve seen a significant number of landlords returning to the lettings market if they cannot get the sales value they require.
Higher mortgage costs, taxation and service charges have increased operating expenses but, despite headwinds, parts of the rental market have remained resilient. As a result, rental growth has remained positive in these markets, helping some landlords improve overall yields.
In London, landlords are often achieving offers at or around the asking rent, particularly where there is strong domestic and international demand. Competition is strongest for homes with sought-after features such as private gardens, outdoor space, home offices, excellent transport links and high-quality finishes.
Regional markets tell a slightly different story. Correct pricing from the outset is key to attracting interest; a choice of tenant profile is one of the highest priorities for many landlords, as well as minimising void periods over the winter months.
This is reflected in Savills latest prime rental index, which shows annual rental growth of 1.9% in prime central London, 2.9% in outer prime London, 2.1% across the prime commuter zone and 0.7% in the Cotswolds and South West. While rents continue to rise, growth remains closely linked to local market conditions and affordability rather than legislative change alone.
Six months on, there is little evidence to suggest that the Renters’ Rights Act is the primary driver of rental growth or, indeed, the disruptive force many landlords feared. However, still in its infancy, it may be too early to draw definitive conclusions about the RRA’s longer-term impact on market behaviour and supply.
*Savills letting divisional data