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Rental Property Ladder Becomes Harder to Climb

Despite increasing market prospects for the property sector as a whole, concerns have been raised as the overall affordability of rental properties; this time, not solely within the reputedly-expensive London area. As of present, the majority of private sector landlords have a stated requirement of some four weeks’ worth of

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BDC 317 : Jun 2024

rents

Rental Property Ladder Becomes Harder to Climb

Despite increasing market prospects for the property sector as a whole, concerns have been raised as the overall affordability of rental properties; this time, not solely within the reputedly-expensive London area. As of present, the majority of private sector landlords have a stated requirement of some four weeks’ worth of rent before handing over the keys which, given increases in the average rental price of such properties, is beginning to raise similar concerns of affordability as have been seen in those relating to getting onto the property ladder. In fact, the average rental deposit has been predicted to increase by approximately 40% by 2026, hitting a colossal value of £1,111 which, though seemingly far smaller than the costs of getting onto the property ladder, may put people off approaching the rental ladder, even as a temporary measure. With the average monthly rental deposit then, based off these predictions, sitting at around 70% of the average monthly wage, the difficulty of individuals getting their own property in any shape or form is seemingly on the rise. Yet, there are considerable regional variations in this percentage, as reported by the Centre for Economic and Business Research. In London, where affordability has always been of great concern, it has actually been reported that the average rental deposit may reach up to 120% of the average monthly wage, serving as a stark 99% increase on last year and no-doubt putting concerns in the minds of many individuals looking to move or break away from home. Additionally, research has also highlighted that more and more landlords will expecting deposits to be of closer to six weeks’ worth of rent in the coming times, this then adding to the burden of those looking to get onto the rental ladder. With these growing prices, reduced affordability and barrier to enter onto the rental market, it begs the question how the market will react. Will getting onto the rental market be too much of a burden for some? As the major benefit of rental over purchasing a property lies within the affordability, these changes may very well change the landscape of the rental and property sectors entirely. Only time will tell, however.

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Savills Highlights Similar Rents between Refurbished and New-Build Office Space

Leeds is seemingly becoming an increased hotbed of commercial activity, with notable demand for office space in the city, both as consequence and result. As such, this demand has led to a considerable spike in those rents associated with quality refurbished space, where Savills has reported these values hitting circa £26 per square foot of office space; a figure which remains £1 shy of new-build, Grade A offices (£27 per square foot). The major factor to which this situation can be attributed seems to be the enhanced levels of demand seen from organisations which are aiming to “set up shop” and benefit from the comparatively low living and property costs in the city. This, in effect, has led to such increases in demand volume and associated developments that Leeds now stands as the city with the second largest volume of development starts, as reported by Savills. Yet, whilst the situation is naturally prey to the whims of the uneven scales of supply and demand, the increased number of new developments is expected to tip the scales slightly more favourably for those looking for office space over the course of the year. As such, the available stock of suitable office spaces is expected to re-open the difference between new-build and refurbished office spaces as, one might argue, it should be. Looking at the levels of investment, it has also been reported by Savills that, over the course of the previous year, prime equivalent yields with regard to regional offices has moved in by 50 bps, hitting 4.75%. Additionally, the volume of investment into the market for office space outside of the capital city has risen notable during the past 2 years. Savills’ Associate Director of Office Agency, Paddy Carter commented: “Leeds will see a step change in the quality and variety of space available to occupiers this year.” To pre-empt this, of course, there has already been a surge of interest from occupiers of all shapes and sizes.

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