Rents are fairly static, with London still lagging

Published by Hannah Nemeth on 21 November 2017.
Last updated on 21 November 2017

Rents are fairly static, with London still lagging

Rents are still going up, but fairly slowly at between 0.5% and 1.5% over the year to October 2017, depending on which rental index you choose.

But despite this, affordability remains an issue for many tenants. Almost one in four private tenants (24% excluding ‘don’t knows’) admit to spending more than half of their income on rent, according to a survey by TheHouseShop.com.

Around one in six private renters said they are currently spending over 60% of their monthly income on housing

The online agent found that mortgaged homeowners are in a stronger financial position than tenants, with 15% of homeowners with mortgages spending more than half their incomes on housing, compared to the 24% of private renters.

Key stats at a glance: 

  • Countrywide Monthly Lettings Index – rents up by 0.5% over the year to October.
  • HomeLet Rental Index – UK rents up by 0.9% over the year to October 2017. 
  • Office for National Statistics (ONS) Index of Private Housing Rental Prices for October – UK rents up by 1.5% to October 2017.
  • Royal Institute of Chartered Surveyors (RICS) October 2017 Residential Market Survey – predicts that rents will go up by around 3.5% over the next 12 months.

Rental growth slows down

HomeLet’s October Rental Index reveals that rents in the UK went up by just 0.9% in October compared to a year ago, with the average monthly rent at £909.

In London, rents went up by 0.6% over the same period with the average rent now £1,556. The average rent in the UK is £755 if London is excluded from the data – up by 1.5% on last year.

Like last month, HomeLet reports that rents went up over the year in 11 out of the 12 regions it covers, with the exception being the South East. However, rents on new tenancies were lower than in September in every region.

Tenants in the East Midlands faced the biggest rental price hikes, with rents up by 3.6% over the year, followed by Northern Ireland (3.4%) and West Midlands (2.9%).

Rents ‘nudge up’ in the Midlands

Countrywide reports that rents grew by 0.5% in the year to October 2017, and that this was driven by rents going up in the Midlands and Wales. This means that the average rent in the UK is now £958 a month – just £5 more than a year ago.

In Greater London, the average rent is £1,690, compared with £1,706 a year ago – a drop of -0.9%. Excluding London, rental growth across the UK has gone up by 1.2% over the year.

Tenants in the Midlands and Wales saw the most significant hikes, up by 2.2% (£677 average monthly rent) and 2.6% (£658) respectively over the last year.

Johnny Morris, research director at Countrywide, says: “Rental growth across northern England has slowed under pressure from record numbers of new landlords. But it’s a different story across the Midlands and parts of the South where rents are once again nudging upwards. It looks like the last effects of the investor stamp duty surcharge have finally worked their way through the system.”

Slowdown in growth driven by London

The Office for National Statistics (ONS) Index of private housing rental prices in Great Britain for October 2017 reports that rents went up annually by 1.5% over the year – down from 1.6% in September. This means that a property that was rented for £500 a month in October 2016, would, on average, cost £507.50 to rent a year later.

It points out this slowdown in the growth in private rental prices is mainly driven by a slowdown in London over the same period, where rents have gone up by just 0.8% since October 2016.

In England and Wales, private rental prices both grew by 1.5%. Meanwhile, rental growth in Scotland increased by 0.4% annually – its highest rate since May 2016.

The ONS reports that between January 2011 and October 2017, private rental prices in Great Britain went up by 15.3%. When London is excluded for these figures, private rental prices increased by 11.4% over the same period.

‘Modest’ rent rises

The Royal Institute of Chartered Surveyors’ (RICS) latest Residential Market Survey reports that tenant demand has remained fairly static during the three months to October, while new instructions from landlords continue to drop.

It predicts modest rent rises over the next three months and that over the next five years, rents are expected to go up by an average of around 3.5% a year across the UK, compared with 1% growth for house prices. It reports that London remains the only area where there will be no rental growth, due to a lack of tenant demand.

METHODOLOGY

Countrywide Lettings Index - Rent and rental growth figures for each month are based on a three-month rolling average rather than lets agreed in the past month. The index is based on the 90,000 homes let and managed by Countrywide in each year, adjusting for their location and type. It is based on achieved rather than advertised rents and the published monthly rental figures are an average of the new lets and renewals of tenancies over a rolling three-month period.

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 332 responses coming from 601 branches.

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