This episode of Good Landlording is the rental market update for mid-2024, and has the latest Q2 data for rent in England in the 12 months to June 2024.
Richard and Suzanne also discuss inflation, the likely impact of population growth on demand, and prospects for future growth.
As well as referring to data from ONS and Rightmove, they also talk about the findings in recent reports by Paragon Bank's Next Generation Landlord Report 2024 and Savills' UK Build to Rent Market Update – Q2 2024.
For August, the Good Landlording podcast will have "summer specials" which will feature special guests on topics ranging from interior design to HMOs, supported living and buying at auction. It'll give us all a welcome break from politics, as well as introducing us to new ideas.
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What we cover in this episodeLatest inflation figures for Q2 2024Consumer price inflationWage inflationWhat's been happening to rent in 2024?What effect will the government building programme on the PRS?What do Savills say in their Q2 2024 report?Paragon Bank's research into motivations of new investors
Latest inflation figures for Q2 2024
Consumer price inflation
According to the ONS, the Consumer Prices Index increased by 2.0% in the 12 months to June 2024, the same as the 12 months to May 2024.
However, when it comes to landlords, the Consumer Prices Index including owner occupiers' housing costs (CPIH) is more relevant. That rose by 2.8% in the 12 months to June 2024, unchanged from 12 months to May 2024.
CPIH is more likely to reflect our costs as landlords, whereas CPI is what the tenant is feeling.
Wage inflation
ONS figures say that the annual growth in employees’ average regular earnings (excluding bonuses) was 5.7% in the 12 months to May 2024. This is an increase in real terms of 2.5%.
However, this is just an average as wage inflation has been stronger in the public sector (6.4%) than the private sector (5.6%).
Within the private sector, the finance and business services sector saw the largest annual regular growth rate at 6.7%; while the construction sector saw the smallest annual regular growth rate at 3.0%.
Suzanne usually increase rents by the lower of CPIH and wage inflation, which she believes is a good compromise.
>> Related episode: #6: What landlords need to know about rent
What's been happening to rent in 2024?
It can be difficult to figure out exactly what is happening to rent as the data is conflicting. However, rent is now no longer in double digit territory, and the rate of increase has been slowing down.
Both Rightmove and the ONS agree that the average rent across is now around £1,300. Rightmove says it is £1,314 for new tenancies (an increase of 6.8%) across the UK, and the ONS has the figure as £1,310 in England, an increase of 8.6%. The ONS figure includes rents for exiting tenancies as well as new tenancies.
Rightmove say the average rent in London was £2,661 at the end of Q2 2024, an increase in 4% from a year ago. ONS says that rents increased an average of 9.7% in London.
In the North East, by contrast, the government data says that rent inflation in the 12 months to June 2024 was 5.9%, whereas Rightmove says it is 8.3%.
According to SpareRoom, rents in London are flat (an increase of 1% in the 12 months to June 2024), with room rents in multiple postcodes decreasing. SW14 (Mortlake) saw the biggest drop of 9%, followed by W8 (Holland Park) and NW5 (Kentish Town) where rents decreased by 7%.
What effect will the government building programme on the PRS?
Government figures are predicting that the UK's population will grow from under 68 million now, to 70 million by mid-2026, and almost 74 million by 2036 (12 years away).
The population is therefore projected to grow even more quickly than the government’s rather optimistic pledge to build 1.5 million homes by 2029,
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