A new quarterly index, which uses a database of millions of properties, has revealed that the average UK rent went up by just £11.55 or 1.51% between the third quarters of 2016 and 2017.
Julian Foster, managing director at The DPS, says: “Figures suggest that the rental market has slowed nationally since the third quarter of 2016, and letting agents, landlords and tenants will be keen to see whether this trend continues over the next year.
“While we are still some distance from seeing the roughly 3% fall that came with the last financial crisis, the change over the past represents a significant shift for the market.”
The DPS’s figures reflect the data in other rental indices but are more positive than HomeLet’s index, which reports that rents have gone up by 0.07% nationally – that’s just £6 a month more than a year ago.
Key stats at a glance:
- Countrywide Monthly Lettings Index – rents up by 1.2% over the year to November 2017.
- DPS Rent Index – rents up by 1.51% between third quarters of 2016 and 2017.
- HomeLet Rental Index – UK rents up by 0.07% over the year to November 2017.
- Office for National Statistics (ONS) Index of Private Housing Rental Prices for November – UK rents up by 1.4% to November 2017.
- Royal Institute of Chartered Surveyors (RICS) November 2017 Residential Market Survey – predicts a 1% rise in rents in 2018.
Rise of the accidental landlord
Countrywide reveals some interesting statistics about new landlords who are dipping their toes in the buy-to-let market. It reports that accidental landlords have added 80,000 homes to the lettings market, with one in 12 homes newly on the market in 2017 previously for sale.
The estate agent says rents grew by 1.2% in the year to November 2017, with rents rising seven times faster in the Midlands that in London. This means that the average rent in the UK is now £958 a month – £12 more than a year ago.
In Greater London, the average monthly rent is £1,702, compared with £1,695 a year ago – a rise of 0.4%. Excluding London, rental growth across the UK has gone up by 1.6% over the year.
Johnny Morris, research director at Countrywide, says: “While most landlords are in the business by choice, the past three years have seen an increase in the numbers letting out a property they had previously tried to sell.
“With mortgage rates remaining low, these discretional sellers can afford to let their home, while they wait and see what the future holds for the sales market.”
Rental growth vs. inflation
HomeLet reports that average rents across the UK rose by 0.7% over the year to November 2017, with the average monthly rent now £904. It points out that it is the eleventh month in which rental growth has lagged behind the inflation rate, which currently stands at 3.1%.
November’s 0.7% rate of annual rental price inflation compares to an average of 2.8% in November 2016.
Rents in London fell -0.2% over the year to November 2017, with the average monthly rent now £1,530 – down from £1,556 in October 2017 and the fifth month in the row that rents have not gone up in the capital.
Take out London from HomeLet’s data, and annual rental growth across the UK would have been 1.1% rather than 0.7% in November 2017.
Four regions reported annual growth of more than 3%: East Midlands (4.4%), Northern Ireland (3.3%), the South West (3.4%) and the North East (3.1%). As well as rents falling in London, the East of England and the South East faced rental price drops of -0.3% and -1.9% respectively.
HomeLet’s chief executive Martin Totty says: “Rents are now higher than a year ago in most parts of the country, but there has been no return to the more rapid increases we last saw during the first half of 2016.”
Growth continues to slow
The Office for National Statistics (ONS) Index of private housing rental prices in Great Britain for November 2017 reports that rents went up annually by 1.4% over the year – down from 1.5% in October and from 1.6% in September. This means that a property that was rented for £500 a month in November 2016, would, on average, cost £507 to rent a year later.
Again, this slowdown is fuelled by only slight annual growth in London, where rents went up by just 0.6% over the same period.
In England and Wales, private rental prices grew by 1.4%, while rental growth in Scotland increased by 0.2% annually.
Tenant demand down
The Royal Institute of Chartered Surveyors’ (RICS) Residential Market Survey for November 2017 reports that interest from would-be tenants declined for the first time since 2015, averaging out at a drop of -16%. RICS’ economic forecast predicts rents will rise by a “modest” 1% in 2018.
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 337 responses coming from 634 branches.