Rental round-up: ‘Mixed picture’ as London rents start to pick up

24 January 2018
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While 2017 ended on a more positive note for landlords in the private rented sector, it was not such good news for tenants, particularly in London.

Here, most of the indices suggest that rents are starting to creep up again – although figures from Your Move and the Office for National Statistics (ONS) are less positive.

All the featured indices recorded rents across the country rising annually as 2017 drew to a close, ranging from a meagre 0.7% (Rightmove) to 2.4% (Countrywide).

Regionally, rents seem to be falling in the South East and the biggest rent hike is in the East Midlands, according to HomeLet.

Meanwhile, Rightmove reports that rents for new properties coming on to the market in the North East have soared by 3.3% over the year to December 2017, but Your Move reports prices falling by -1.7% in the North East.

However, you have to consider how low rents are in the North East to start with: Rightmove reports they are now £578 a month – up from £560. In contrast, asking prices for monthly rents in London may have gone up by a more modest 1.2%, according to Rightmove, but this means they are now, on average, a whopping £1,930 a month.

Key stats at a glance:

  • Countrywide Monthly Lettings Index – rents up by +2.4% over the year to December 2017.
  • HomeLet Rental Index – UK rents up by +1.7% over the year to December 2017. 
  • Office for National Statistics (ONS) Index of Private Housing Rental Prices for December – UK rents up by +1.2% to December 2017.
  • Rightmove Rental Trends Tracker (October to December 2017) – National average asking rent (excluding Greater London), +0.7% over the year.
  • Your Move England & Wales Rental Tracker – average rent in England and Wales up by +2.3% over the year.

Rents rise in London as supply is squeezed

Rightmove’s quarterly Rental Trends Tracker reports annual growth of just 0.7% in national asking prices (excluding London) in 2017 – the lowest since 2014.

Asking rents of new rental properties coming on to the market in London were 1.2% higher than at the end of 2016. Rightmove puts this down to landlords rushing to beat the stamp duty hike on additional properties from April 2016, leading to supply going down and rents starting to rise.

Rightmove reports that rents in the South East were down by -0.7% on 2016. In contrast, the North East recorded rents rising over the year at the highest rate – up by 3.3%.

Miles Shipside, Rightmove’s director and housing market analyst, says: “Nationally, rents have been holding pretty steady over 2017, retaining the 3%-plus rises seen in both 2015 and 2016, and adding a more modest 0.7% in the past 12 months.

“Increasingly stretched tenant affordability and the surge of buy-to-let property supply beating the stamp duty tax hike deadline, have acted together to mute landlord pricing power. In contrast, after a few years of falling rents in London they’re back on the up again, due to a combination of tightening stock available to rent and strong demand.”

Countrywide also reports that rental growth picked up in 2017, with rents growing by 2.4% in the year to December 2017 – compared with 1.8% in 2016. This means that the average rent in the UK is now £960 a month – £23 more than a year ago.

It reports that London rents went up by 3.2% over the year, with the average monthly rent at £1,706 – compared with £1,654 in December 2016.

Johnny Morris, research director at Countrywide, says: “Last year saw the rate of rental growth pick up to get closer to its long-term average. Most of the rise comes from a pick-up in rental growth in London, after falls in 2016. Rents rose across every region of Great Britain last year, although the north of England saw rents rise at a slower rate than they did in 2016.

“Rental growth has been supported by a fall in the number of homes on the rental market, with the biggest fall in London. It looks like increased competition between tenants for rental homes will drive faster rental growth in 2018.”

Price hike in the East Midlands

HomeLet reports that average rents across the UK rose by 1.7% over the year to December 2017, with the average monthly rent now £907, compared to £892 a year earlier. It says that rents rose at a slower rate than general inflation in every month of 2017.

The biggest hike in rents was recorded in the East Midlands, with rents, on average, 4.6% higher in December 2017 than in the same month of 2016. However, they still remain low, with rent typically costing £611 a month – only Wales and the North East are lower.

The South East was the only region HomeLet reports registered a fall in rents in December, with average rents down 1% on 2016. In contrast, the South West, the North East and Northern Ireland recorded house price growth of more than 3%.

Rents in London went up by 1% in December, with the average rent £1,524, compared to £1,509 a year previously.

Martin Totty, HomeLet’s chief executive, says: “We continue to see a very mixed picture regionally: in areas of the country where rents rose less quickly in 2015 and 2016, rental price inflation was much higher last year; by contrast, those areas where rents were previously rising fastest have been seeing much more modest increases.”

Signs of a slowdown, says ONS

The ONS Index of private housing rental prices in Great Britain for December 2017 reports that rents rose by 1.2% in the 12 months to December – the lowest annual growth since it started recording private rental data in January 2012.

In England, private rental prices went up by 1.3%, while rents in Wales went up by 1.7% and rents in Scotland rose by a more modest 0.4%. Similarly, rents in London went up by 0.4% over the year to December 2017.

It highlights that a property that was rented for £500 a month in December 2016 would cost £506 to rent in December 2017, and, as in previous months, suggests that the slowdown is driven by slow growth in London.

Rents up in most regions

Your Move’s latest England & Wales Rental Tracker reports that average rent in December was £850 – up by +2.3% over the year. The fastest growth was in the East of England, where rents were up by +3.3% over the year. It reports rents dropping in London and North East. In London, it says rents were down annually by -1.4%, with an average monthly rent of £1,274.

Martyn Alderton, national lettings director for Your Move and Reeds Rains, says: “The rental market in England and Wales ended 2017 on a positive note for landlords, with rents, overall, up 2.3% compared to a year ago, and average yields across the country now at 4.4%.

“However, behind these figures lie fluctuations particularly in relation to the fall in average rents in London and strong growth in average rents in other regions. In many ways, the rebalancing of the rental market across the country should be seen as a good thing as demand spreads to other areas and keeps the market robust.

“London still remains one of the most popular and expensive places to rent, yet we are now seeing strong growth in demand for rental properties in the regions around the capital.”

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.

Rightmove Rental Trends Tracker – a quarterly index that is compiled from the asking rents of properties coming onto the market on Rightmove.co.uk. Rightmove measured 305,091 asking rents for properties advertised on Rightmove.co.uk by agents in the fourth quarter of 2017.

Your Move England & Wales Rental Tracker – based on analysis of approximately 20,000 Your Move properties across England and Wales.

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