Grainger, the UK’s largest listed landlord, has boosted its dividend by 10 per cent following a surge in rental income. The FTSE 250 group predicts rents will continue to rise as small private landlords quit the market.
The Newcastle-headquartered company, which rents 10,000 homes across the UK, on Thursday reported like-for-like annual rental growth of 6.8 per cent in the six months to March, up from 3.5 per cent a year before.
Grainger expects rents will continue to accelerate, supported by wage inflation, as the supply of homes for a growing number of tenants is pinched by an exodus of small private landlords.
“They are actually leaving the market. That is what is exacerbating the supply-and-demand imbalance,” said chief executive Helen Gordon. “The reason they are leaving is increased regulation, increased taxation and, probably for them, rising interest rates that they can’t deduct from their profits.”
The tight market contributed to a 12 per cent increase in net rental income at Grainger to £48mn in the six months to March, allowing the company to boost its dividend 10 per cent to 2.28p per share from 2.08p.
The company plans to add 6,000 homes through a £1.6bn development programme as large investors ramp up construction of so-called “built to rent” property, which has emerged as a growing sector in an otherwise largely gloomy commercial property market.
Grainger’s portfolio is 98.5 per cent occupied, the company said, with newly let properties going for rents 8.2 per cent higher than last year.
Gordon said big professional landlords already played a larger role in other countries such as Germany and Canada, and that the UK was in the “foothills of a transition” from small to large landlords. “In the UK, it is still a mama and papa industry,” she said.
Rents on privately let properties increased 4.9 per cent across the UK in the year to March, according to the ONS; the fastest increase since the agency began tracking in 2016. The supply of rental homes has remained largely flat since 2016, according to housing website Zoopla, while the number of renters has grown.
The UK government has been under increasing pressure to tackle the housing shortage. Levelling up secretary Michael Gove is shortly expected to bring forward a rental reform bill that will end “no fault” evictions.
Gordon said she supported measures to give renters more long-term security in their homes, but that the government needed to provide an efficient way to evict “bad egg” tenants who “disturb their neighbours” because current routes through the courts are too slow.
