Private Sector Rents Bulletin Issue 2 Autumn 2003 Annual bulletin number 2 This is the second GLA private sector rents bulletin. In future we aim to produce the bulletin annually at around the same time of year. The bulletin sets out to provide a snapshot of private sector rents in London on the basis of data collected in classified advertisements for lettings. In this bulletin, data from newspapers issued in November 2003 have been analysed on behalf of the GLA by Plus Four Market Research Limited. The primary sources of data were ‘Loot’ and the ‘Evening Standard’, though local newspapers were also used in an attempt to achieve London-wide coverage. The data limitations are set out on page 4. Sample size A total of about 8,000 classified adverts were coded and entered on the database for this year’s bulletin. Private sector rents remain high, but may be falling Once again the findings reflect the wide range of rents in the sector and the variations in rents within and between boroughs. While rents remain very high in London compared to the rest of Great Britain, the evidence suggests that there has been a slight decline in overall rent levels over the past year, at least for self-contained accommodation. Table 1 gives an analysis of weekly rents for rooms, bedsits, sharers and studios. Tables 2 to 4 give average weekly rents for different sizes of houses, maisonettes and flats. The highest average (mean) rents for houses, maisonettes and flats are found in the central London boroughs of Camden, Hammersmith & Fulham, Kensington & Chelsea and Westminster. Relatively high rents for larger properties (three or more bedrooms) are found in Islington and Tower Hamlets, the latter perhaps influenced by high prices in dockland areas.
The lowest average rents are found in Bexley, Havering, Bromley, Sutton and Barking & Dagenham. The overall average rent for two-bedroom accommodation in all boroughs was £225. The corresponding average rent for all central boroughs (see the glossary on page 4) was £301 and for other boroughs £206. Although the data given in tables 1 to 4 has to be treated with caution (see page 4) there is some evidence of a small fall in average rent levels compared to last year. The average rent for two-bedroom accommodation was £10 per week lower in November 2003 compared to a similar period the previous year. In real terms (taking into account inflation) this will be a slight underestimate of the difference. The apparent decline in average rents is higher for other sizes of accommodation. The decline in average rent levels is not common across all London boroughs, however, though the sample sizes may not support comparisons over time at a borough level. The fall in average rent levels was higher in central London than in other London boroughs. The highest average rents for rooms, bedsits and sharers are similarly found in Camden, Kensington & Chelsea and Westminster, though average rents were over £100 per week in nine other boroughs. Overview of private sector rents in London The government’s regional figures on rent levels in ‘free market’ private tenancies (i.e. not including regulated tenancies) are given in Table 5. These show that, in the years 2001/02 and 2002/03 combined, the average rent in London was £189 per week. This is nearly double any other region of England, with the exception of the rest of the South East (£135). Data from the Royal Institution of Chartered Surveyors (RICS) shows an even starker difference between London and the rest of the country (Table 6). The data shows the average rent per calendar month for all categories of property in London
was £1,510 in the third quarter of 2003, compared to £511 per month for the rest of Great Britain excluding London. Rent levels in London were more than double those of the region with the next highest average rent, which was the rest of the South East at £692 per month. Data from RICS lettings agencies will tend to reflect higher rents than ODPM surveys or classified advertisements in Loot, because of the nature of their market. Despite much higher rents in London, evidence from RICS quarterly surveys show that rent levels have declined in the capital in the current year and that they are rising in other regions of the country, particularly the North (1). The findings in this bulletin give a similar picture regarding private rents in London. In the first GLA private sector rents bulletin (Winter 2002/03), we reported that although rents were very high in London compared to other regions, there was evidence that rents had been falling over the past year. This was on the basis of the quarterly RICS residential lettings surveys, which are based on returns from surveyors. The fall in rents was attributed by RICS to an oversupply of property to rent following the ‘buy to let’ boom in London. The outlook at the time of the last bulletin was, however, that tenant demand was becoming stronger and that a realignment in supply and demand conditions would take place. It was suggested that an increasing number of prospective first-time buyers were renting because they could not afford to buy and that investor activity would stabilise. This has not been the case to date. RICS surveys in 2003 indicate that although private rents in London remain by far the most expensive in Great Britain, they have continued to decline throughout this year. Comparing figures for the third quarter of 2003 with the third quarter of 2002, there was an overall reduction of £144 per month across all sizes and types of property (equivalent to £33 per week). RICS surveyors reported that demand for rental property in London barely rose at all in 2003. This has been coupled with high rises in new instructions from property owners to RICS surveyors in the first half of 2003 and a much smaller increase in the third quarter. The slowdown in the third
quarter may indicate that a realignment of the London rental market is beginning to take place. We know that demand for affordable housing has reached record levels in London, with over 62,000 homeless households in temporary accommodation and a crisis in recruitment and retention in key organisations and industries. Yet RICS surveyors report that demand for the rented properties they are marketing has hardly risen and rent levels have declined. This suggests that much of the rental market in London is unaffordable for many groups needing housing. The result may be further reductions in rent levels. This is a good reason to expand initiatives such as private sector leasing, where councils or housing associations use private sector properties for an agreed period to house people in housing need and, in return, property owners avoid having to manage tenancies themselves, receive guaranteed rental income and receive the property back in good condition at the end of the period. A further problem is that many landlords will not rent to people in receipt of Housing Benefit. Many of the adverts we see in newspapers state ‘no DSS’ or similar. This reflects a variety of familiar problems with the current housing benefit system and administration, for example uncertainty over how much benefit will be received in any particular case and long delays experienced in receiving benefits.
Housing Benefit reform The Local Housing Allowance (LHA) is being launched by the government as an alternative to the current housing benefit system in ten ‘pathfinder’ authorities. London’s pathfinder, Lewisham, began in in December 2003. Private rented sector tenants in the pathfinders will be the first to receive the new allowance, which is intended to give them choice over where they live and how much rent they pay. (2) Claimants will receive a standard allowance based on the area in which they live and the number of occupiers in the property. The amount will be based on a standard local rate
set by the Rent Officer and will reflect rents in the middle of the market. These allowances will be published and Rent Officers will no longer need to decide for each individual property what level of rent is eligible for housing benefit. Tenants who rent a property at below the standard allowance, who move to a less expensive property in the local area, or who negotiate to keep the rent below the standard allowance, will be able to keep the difference. The intention is also that payment of the allowance will normally be to the tenant rather than the landlord. This move away from paying benefit direct to a landlord is intended to encourage personal responsibility. Some concerns have been expressed about the possible impact of the proposals. It has been argued that the ending of benefit direct will inevitably lead to increased rent arrears. It has also been predicted that rents in a locality that are currently lower than average will tend to increase to published standard allowance levels. The Department for Work and Pensions will be evaluating the pathfinders, including whether the new system has any impact on rent levels and on the quality or on supply of accommodation in the private rented sector. (2) Further information about the proposed reforms is available in ‘Building choice and responsibility; a radical agenda for Housing Benefit’ (available at www.dwp.gov.uk). Private landlords survey The Office of the Deputy Prime Minister (ODPM) has recently produced a report with findings from a private landlords’ survey in 2001.(3) Some of the findings from the survey include (note that these are national, not specifically London): The number of company and large-scale landlords appears to have been declining and the sector is increasingly dominated by small-scale private individual landlords renting property as a sideline. Nearly two thirds of privately rented dwellings are owned by private individuals, most of whom have other paid employment.
The average net rental return on market value (i.e. net of running costs and excluding increases in capital value) was 5.5 per cent, although rising house prices in many areas would have provided landlords with higher total returns. Gross rental returns (before running costs and excluding increases in capital values) for a quarter of dwellings were less than five per cent, with costs exceeding income for some seven per cent of dwellings. Preferred tenants are those in work, particularly ‘young professionals’. Lettings to tenants on Housing Benefit account for only 18 per cent of lettings overall and some 30 per cent of landlords have never let to tenants on Housing Benefit. Nearly three-quarters of those with experience of letting to tenants on Housing Benefit would prefer not to let to people on benefits, with landlords frequently dissatisfied with the speed of processing claims (60 per cent). (3) Private Landlords Survey: English House Condition Survey 2001 Data limitations The market rent statistics in tables 1, 2, 3 and 4 of this bulletin have been calculated from a computer database of about 8,000 advertised lettings. There are some important qualifications to be borne in mind when considering these data: The small sample size in some boroughs means that it is less possible to be confident about mean rents, i.e. those boroughs for which there were relatively few lettings advertised. In the real market, advertised prices may not be achieved. The advertisements on which the figures are based may not provide a fully representative sample of market rents in the sector; in particular, the calculation of mean rents at both London-wide and borough levels must be influenced by the locational mix of the sample.
It is difficult to assess the extent to which tenancies arising from newspaper advertisements are representative of all private sector unregulated tenancies (some tenancies are let by word of mouth, others through adverts in local shops etc.) No account is taken of whether a property is furnished or unfurnished or whether the rent is inclusive or exclusive of bills. These may have an effect on the rent offered, but the information is often not stated in classified advertisements. The data presented in tables 1 to 4 should therefore be treated as indicative of broad trends rather than as a detailed picture of reality. Glossary Central London - for the purpose of this bulletin, includes the boroughs of Camden, Hammersmith & Fulham, Islington, Kensington & Chelsea and Westminster and the City of London. Acknowledgements Thanks to Plus Four Market Research Limited for their work on collating and analysing the data. (www.plus4.co.uk) Contact us For further information please contact Chris Smith in the Housing and Homelessness Unit, telephone 020 7983 5770, email chris.smith@london.gov.uk.
Table 1 Average rent per week by borough for rooms, bedsits, sharers and studios – November 2003
Rooms, Bedsits, Sharers Mean £ Barking & Dagenham Barnet Bexley Brent Bromley Camden
72.55 94.64 72.82 94.75 79.94 131.37
Studios Mean Number £
112.00 128.26 96.33 130.07 116.88 164.21 2 58 3 71 8 71
Number Minimum Maximum £ £
11 22 17 28 33 27 60 65 55 50 46 90 80 120 88 160 110 210
Median £
75 91 75 97 80 127
Croydon Ealing Enfield Greenwich Hackney Hammersmith & Fulham Haringey Harrow Havering Hillingdon Hounslow Islington Kensington & Chelsea Kingston upon Thames Lambeth Lewisham Merton Newham Redbridge Richmond upon Thames Southwark Sutton Tower Hamlets Waltham Forest Wandsworth Westminster Corporation of London Central London Other boroughs All boroughs
88.68 96.57 86.79 88.05 96.24 114.33 91.97 87.63 71.40 74.00 105.50 103.42 120.73 80.86 114.19 82.72 82.94 85.53 76.87 109.72 100.67 117.29 101.86 86.62 101.75 140.69 150.00
19 23 58 22 21 27 37 16 10 3 16 24 11 14 36 32 16 15 15 25 27 7 22 13 36 26 1
46 50 50 60 70 70 60 55 50 65 75 70 70 53 60 58 57 58 50 67 58 80 60 55 55 80 150
210 146 333 133 150 150 325 115 100 92 150 130 195 95 397 150 127 220 125 300 360 290 295 150 350 250 150
85 92 79 75 92 115 85 90 70 65 103 108 115 85 100 79 79 75 75 100 90 95 88 75 90 126 150
121.36 133.55 152.84 115.89 134.75 142.35 125.10 124.85 114.00 123.00 121.06 139.69 165.81 133.00 129.03 116.72 135.77 111.13 121.07 117.86 147.53 * 150.16 115.25 139.66 166.68 182.80
11 29 37 9 28 49 105 13 1 10 18 52 73 3 32 32 13 15 14 7 17 * 19 8 38 65 5
122.86 92.09 97.24
116 594 710
70 46 46
250 397 397
120 84 89
157.94 129.60 140.48
315 601 916
Source: Greater London Authority February 2004 Notes: *No data available. For a list of central London boroughs, see the Glossary on page 4. Data limitations – see page 4.
Table 2 Average rent per week by borough for houses, maisonettes and flats, by number of bedrooms – November 2003
Number of bedrooms
One
Two Rent No. Rent
Three No.
Four or more Rent No.
Rent
No.
£
Barking & Dagenham Barnet Bexley Brent Bromley Camden Croydon Ealing Enfield Greenwich Hackney Hammersmith & Fulham Haringey Harrow Havering Hillingdon Hounslow Islington Kensington & Chelsea Kingston upon Thames Lambeth Lewisham Merton Newham Redbridge Richmond upon Thames Southwark Sutton Tower Hamlets Waltham Forest Wandsworth Westminster Corporation of London Central London Other boroughs All boroughs
£
21 78 25 61 52 83 37 64 44 40 63 73 107 41 16 10 48 108 61 15 103 84 74 61 41 28 97 14 56 53 128 93 12 430 1,461 1,891 179.37 200.21 160.72 217.00 173.16 302.91 186.64 210.71 196.09 216.46 226.06 277.90 206.18 196.59 164.35 228.64 237.95 271.11 331.65 205.36 219.51 186.40 217.73 183.80 172.38 233.58 224.59 171.71 233.53 179.37 234.12 332.57 281.43 301.32 206.01 224.55 40 85 54 74 55 45 45 58 137 68 71 69 105 51 17 14 41 73 52 22 118 90 55 69 39 31 98 17 70 62 156 74 7 320 1,742 2,062
£
201.29 275.93 184.06 257.63 198.04 356.80 216.46 288.86 234.52 238.42 252.00 378.08 263.28 233.30 118.58 226.32 275.21 340.46 474.00 270.00 293.84 224.00 276.21 223.90 235.70 251.70 251.99 202.00 310.18 230.28 284.60 398.67 * 372.53 251.04 266.09 24 41 32 51 24 40 24 79 85 52 31 48 58 60 12 22 28 35 10 10 73 50 53 92 63 10 70 6 39 71 109 18 * 151 1,269 1,420
£
272.00 332.08 224.00 360.00 352.50 495.42 296.85 396.05 346.50 282.40 342.69 517.39 324.41 330.57 253.33 345.06 405.43 460.73 568.20 335.00 388.05 298.92 414.16 258.69 263.46 432.00 329.51 295.25 372.75 264.78 372.13 525.38 425.00 503.11 344.69 366.04 6 36 7 55 2 12 13 56 32 15 26 44 69 14 6 18 14 33 10 2 111 26 25 55 13 5 61 4 40 23 98 13 1 113 832 945
137.71 157.87 129.28 166.43 147.62 215.66 143.19 179.22 139.57 146.78 173.30 213.64 163.61 157.27 127.81 151.80 175.83 197.04 244.07 169.13 176.13 147.94 171.20 149.13 142.34 196.39 173.13 134.86 196.96 143.36 188.97 245.57 235.00 221.68 164.01 179.19
Source: Greater London Authority February 2004 Note: * No data available, For a list of central London boroughs, see the Glossary on page 4. Data limitations – see page 4.
Table 3 Minimum, maximum and median weekly rents, by number of bedrooms – November 2003
Number of bedrooms
One Min £ Barking & Dagenham Barnet Bexley Brent Bromley Camden Croydon Ealing Enfield Greenwich Hackney Hammersmit h & Fulham Haringey Harrow Havering Hillingdon Hounslow Islington Kensington & Chelsea Kingston upon Thames Lambeth Lewisham Merton Newham Redbridge Richmond upon Thames Southwark Sutton Tower Hamlets Waltham Forest Wandsworth Westminster Corporation Max £ Med £ Min £ Two Max £ Med £ Min £ Max £ Three Med £ Min £ Four or more Max Med £ £
115 75 115 115 115 140 118 130 65 115 115 157 80 117 95 139 127 115 150 92
175 250 150 254 196 320 196 254 191 190 570 550 270 200 150 167 275 350 395 225
137 158 127 170 150 200 143 176 150 139 165 200 160 150 131 150 174 190 245 173
98 145 135 160 127 145 139 121 80 138 115 140 58 75 135 155 118 120 210 156
650 360 200 350 231 450 750 280 323 650 595 450 350 427 185 312 500 510 750 250
173 196 161 209 173 300 173 217 192 180 200 275 200 185 162 214 220 250 325 198
144 195 133 150 160 250 185 185 173 139 160 277 180 53 160 173 202 220 380 225
254 420 250 400 254 475 300 925 335 370 330 675 420 462 220 300 575 585 650 323
203 280 176 254 202 350 215 277 230 231 265 380 250 228 188 219 242 330 475 273
167 250 169 265 220 320 230 197 210 208 220 250 200 185 185 210 219 240 275 335
323 312 500 305 370 208 647 350 485 353 600 500 400 277 660 365 800 312 525 254 500 338 975 500 550 323 693 277 346 241 577 300 795 363 750 425 900 525 335 335
104 95 127 115 100 144
310 196 346 240 167 650
170 150 164 150 145 173
150 115 156 80 124 150
600 271 323 325 210 380
201 185 200 185 170 219
162 150 173 162 175 191
475 370 508 300 955 347
277 219 277 223 220 248
150 219 231 200 190 350
700 375 480 280 577 438 480 250 393 250 680 380
100 98 130 118 125 155 165
625 161 320 170 280 500 300
162 140 185 140 185 230 228
141 150 175 139 80 230 195
850 196 340 240 350 650 350
216 172 230 176 230 300 300
70 196 220 178 196 300 *
500 208 750 370 450 600 *
248 202 299 225 271 390 *
180 290 230 210 145 425 425
460 320 311 290 625 378 400 231 800 340 700 485 425 425
of London Central London Other boroughs All boroughs
115 65 65
550 650 650
210 156 170
120 58 58
750 850 850
295 196 200
220 53 53
675 955 955
365 240 250
240 145 145
975 500 800 325 975 346
Source: Greater London Authority February 2004 Noses: * No data recorded. When considering the minimum and maximum rents in this table, reference should be made to the sample numbers in Table 2 on which these figures have been based. Data limitations – see page 4. For a list of central London boroughs, see the Glossary on page 4.
Table 4 Mean weekly rents (£) for postcodes in central London boroughs – November 2003
One bedroom Two bedrooms Three bedrooms
N1 N4 N5 N6 N7 N19 NW1 NW3 NW5 NW6 NW8 SW1 SW3 SW5 SW6 SW7 SW10 W1 W2 W6 W8 W9 W10 W11 W12 W14 EC
Mean Number £ 206 43 161 190 185 179 169 220 231 189 198 228 250 266 232 218 349 261 331 233 226 271 212 213 244 196 216 240 30 12 14 15 11 29 36 4 34 21 19 9 11 27 5 7 7 23 26 13 9 8 16 15 13 35
Mean Number £ 282 36 209 233 251 244 222 300 316 260 274 335 358 338 332 298 490 330 373 351 274 335 276 295 351 232 316 324 27 4 18 9 5 14 23 2 40 13 12 9 9 29 6 4 11 11 21 9 4 10 16 14 12 30
Mean Number £ 358 19 270 346 294 260 265 348 375 316 370 360 750 * * 385 600 * 375 509 381 455 * 428 491 348 419 585 19 4 4 3 3 10 10 7 30 3 1 * * 22 1 * 1 6 21 5 * 4 3 6 5 1
WC
288
9
450
1
*
*
Source: Greater London Authority February 2003 Notes: * No data recorded.. The figures for postcode districts N4, N6 and NW6 relate to the whole district and not just that part that lies within the boundaries of central London boroughs. For data limitations - see page 4.
Table 5 Rents of ‘free market’ private tenancies by region (ODPM)
Year
1993-94 and 1994-95 combined 55 60 54 1994-95 and 1995-96 combined 62 65 60 1995-96 and 1996-97 combined 65 71 61 1996-97 and 1997-98 combined 61 64 62 1997-98 and 1998-99 combined 59 66 62 1998-99 and 1999-00 combined 55 76 65 1999-00 and 2000-01 combined 59 76 66
£s per week
2000-01 and 2001-02 combined 70 77 68 2001-02 and 2002-03 combined 72 79 75
North East North West Yorkshiire & the Humber The North East Midlands West Midlands The Midlands East South West South East London England
57 53 61 57
63 58 63 61
67 59 69 64
63 61 70 66
64 70 65 67
68 70 64 67
69 64 73 68
72 75 79 77
76 82 82 82
69 63 89
75 65 89
78 71 90
82 73 97
82 78 101
83 82 102
89 84 109
94 91 119
96 95 135
112 76
116 81
127 86
133 88
141 90
148 93
151 97
165 106
189 116
Source: ODPM Survey of English Housing 2001-02 data used in this table were grossed by ODPM using control population totals for mid-2001 based on the 2001 Census. This is the best estimate for 2001-02.
Table 6 Average monthly private rents by region – October 2003 (RICS)
£s per calendar month
Yorkshire & the Humber North West North East East Midlands West Midlands East South East South West Wales Scotland Greater London Great Britain Great Britain (excl.London) 1 bed flat Min Max 238 550 300 217 217 290 320 325 325 235 250 500 665 350 425 500 630 900 600 350 450 1,517 Av 300 410 330 300 383 400 550 404 295 300 1,000 2 bed flat Min Max 282 650 360 260 238 350 350 375 370 280 300 600 850 500 525 625 750 1,100 800 500 650 3,033 Av 400 550 350 375 450 500 663 519 325 360 1,300 3 bed semi Min Max 400 650 450 375 303 430 488 550 450 300 375 800 1,000 650 595 700 900 1,500 800 600 750 5,200 Av 459 575 525 469 550 650 800 600 468 475 1,965 4 bed detached Min Max Av 450 850 600 525 500 475 525 600 750 500 375 400 1,125 1,650 1,050 1,125 950 1,800 3,000 1,000 867 1,000 8,667 800 750 650 725 850 1,100 800 638 550 3,033 Weighted Average 409 551 437 403 485 558 692 539 328 364 1,510
501 393
632 486
835 589
1,191 790
690 511
Source: Royal Institution of Chartered Surveyors residential lettings survey – quarter to October 2003. Figures are monthly rents for unfurnished properties. Average rent is a median of all responses from RICS surveyors.
If you have any ideas for how this bulletin could be developed or improved, please send these to: Chris Smith, Greater London Authority, Housing & Homelessness Unit, 4th Floor, City Hall, London SE1 2AA (chris.smith@london.gov.uk)