Bad news for landlords but tenants can look forward to cheaper rents, according to HomeLet, which reports rents falling for the first time in over eight years.
However, other indices reveal a more static picture nationally with modest rental growth over the year. What is clear is that rental growth in London is continuing to slow down – varying from -3% to 1.3% depending on the index.
Key stats at a glance:
- Office for National Statistics (ONS) Index of Private Housing Rental Prices – UK rents up by 1.8% over the year to May 2017.
- HomeLet Rental Index – UK rents down by 0.3% over the year to May 2017.
- Your Move Buy to Let Index – rents up 1.3% in England and Wales over the year to April 2017.
HomeLet’s May Rental Index reports that rents in the UK have fallen for the first time since December 2009.
The average rent on a new tenancy in the UK fell by 0.3% in May compared to the same month a year ago, with the average monthly rent now £901.
HomeLet’s data has shown that the pace of rental price growth in the UK has been slowing recently, having peaked at 4.7% last summer.
Like last month, in London the situation was more marked with rents on new tenancies falling by 3% over the year – again, the steepest decline since 2009. Average rents in the capital fell from £1,572 a month last July to £1,502 in May.
Other regions that have seen rents fall are the North East (-2.3%), the South East (-1.5%), Yorkshire & Humberside (-0.6%) and Scotland (-1.9%).
Martin Totty, HomeLet’s chief executive, says: “May 2017 saw average rents nationally fall for the first time in eight years when the economy had suffered the shock of the financial crisis. HomeLet rental data suggests landlords are now facing a difficult balancing act between ensuring rents are affordable for tenants in a low real wage growth environment while covering their own rising costs.”
Mr Totty adds that this will impact on the choice of properties for tenants. “Tenants will still need a vibrant and growing rented sector to provide them with property options at the time of their choosing. Any constraint to the supply of rental properties, because landlords are unable to achieve the reasonable returns they require, cannot be in the long-term best interests of tenants,” he says.
‘Prices in London are tending downwards’
The Office for National Statistics’ (ONS) Index of private housing rental prices in Great Britain for May 2017 reported that rents went up by 1.8%, which is unchanged since April. This means that a property rented out in May 2017 cost £509 a month.
While rents in England remained close to the national average at 1.9%, in Wales rents went up by just 0.9% and Scotland saw rents drop by -0.1%.
Rents in London went up by a more modest 1.3% over the year – compared with 1.4% in April.
Valerie Bannister, Your Move’s lettings director, says: “Recent years have been characterised by rapidly rising rents in London, with the capital steaming ahead of the rest of the country. That’s no longer the case as prices in London are trending downwards while the rest of the country slowly catches up.”
The South East saw the largest rent rises over the year at 2.8%, followed by the East Midlands and the South West (both 2.5%), and the East of England (2.3%).
Besides London, the lowest annual rental price increases were in the North East (0.6%), the North West (1.3%) and Yorkshire and The Humber (1.7%).
Your Move’s latest Buy to Let Index reports that average rents in April across England and Wales were £804 a month – 1.3% higher than a year ago and 0.5% higher than a month ago.
It reports that rents in London have fallen for the fifth month in a row. The average rental property in the capital was let for £1,273 in April 2017. This is 0.3% lower than in March and 2% down on April 2016.
It reports that Wales had the biggest rent hikes over the year – up by 8.5% – but the monthly figure wasn’t so good, as rents are down by -5.7% since March. Here, the average rent was £602 in April.
This was followed by the East of England, where prices went up by 6.1% year on year, but were down by 0.7% over the month, with a typical rent of £876 a calendar month in April.
According to Your Move, the North East is the cheapest place to rent a property in England and Wales, typically costing just £545 a month.
Like last month, the Royal Institute of Chartered Surveyors (RICS) May 2017 Residential Market Survey shows tenant demand rising moderately since December 2016.
It reports that new landlord instructions were, again, broadly flat. Looking ahead to the next 12 months, surveyors and property professionals who took part in the survey expect around 2% annual rental growth.
As with other indices, London continues to reflect a more static picture than the rest of the UK, with expectations for the year ahead “broadly flat”.
HomeLet Rental Index - Provides data on new tenancies in the UK. As part of referencing prospective tenants each year, HomeLet processes information including the rental amounts agreed, the number of tenants moving into the property, together with the employment status, income and age of all tenants.
ONS Index of Private Housing Rental Prices - An experimental price index tracking the prices paid for renting property from private landlords in Great Britain.
RICS Residential Market Survey - A monthly sentiment survey of chartered surveyors who operate in the residential sales and lettings markets. This survey sample covers 307 responses coming from 595 branches.
Your Move Buy to Let Index - Based on analysis of approximately 20,000 Your Move properties across England and Wales.
It's too early to say whether landlords will pass on agency fees by raising rents for tenants -
but if tenants are faced with higher rents because of the fees, at lease it will be spread
over the year rather than tenants having to stump up large sums in fees at the start of the
Is it a good idea for the government to make life difficult for the private landlord? It's never a
good idea to make life difficult for anyone - but my personal view is recent policy changes
have impacted more on individual landlords with one or two properties rather than large-
scale buy-to-let investors who are more able to cope with these changes.