Rents in the private rented sector in the UK increased by 1% in the 12 months to January 2019, unchanged from December 2018, according to the latest official figures.
In England rents increased by 1.1%, in Wales they rose 0.9%, and in Scotland there was a rise of 0.7%, the figures published by the Office for National Statistics (ONS) show.
In Northern Ireland the figures relate to the 12 months to September 2018 when there was a rise of 1.6% but the ONS says that when the figures for the whole of 2018 are released they are expected to show a slower rate of growth in the last few months of the year.
The figures also shows that in London rents increased by just 0.1% year on year, down from 0.2% in December 2018 and when London is excluded, the growth in England rises to 1.6% on an annual basis.
In England the biggest annual rental price increase was in the East Midlands with a rise of 2.4%, but this was down from 2.5% in December 2018, followed by Yorkshire and The Humber up 1.9% and the West Midlands up 1.8%.
The lowest annual rental price growth was in London where prices increased by 0.1%, followed by the North East, which increased by 0.4%, up from 0.3% in December 2018.
The ONS report points out that growth in private rental prices paid by tenants in the UK has generally slowed since the beginning of 2016, driven mainly by a slowdown in London over the same period. However, from January 2015 to January 2019 rents have increased by 7%.
Kate Davies, executive director of the Intermediary Mortgage Lenders Association (IMLA), believes that rents will continue to rise.
‘Landlords are now facing the challenges of increased legislation and changes to mortgage interest tax relief. As buy to let borrowers start to feel the effects of income tax changes reflected in their most recent tax bills, the pressure to increase rental prices is likely to mount,’ she said.
The IMLA has just published a new report which predicts that the tax burden on landlords will be a main reason for a lacklustre buy to let sector this year and next. It says that gross buy to let lending will likely fall 6% to £36 billion in 2019 and £35 billion in 2020, with landlords purchasing 59,000 rental properties in the coming year, down from 66,000 in 2018.
She also pointed out that UK Finance figures showed that in the third quarter of 2018, new buy to let loans for house purchase were down 15% compared with the same quarter in 2017 and 50% lower than three years earlier, when the first Government changes were announced, marking the end of a period of growth in the stock of private rental dwellings.
‘With landlords set to feel the pain of increased costs and legislation for several more years, the Government must act to ensure that no additional measures risk further eroding the health of the Private Rental Sector are introduced, and that the number of available rental properties does not decrease still further,’ Davies explained.
‘The IMLA will continue to monitor the impact of the tax and regulation changes, as many benefit claimants, who would in the past have had access to social housing, continue to rely on the Private Rental Sector,’ she added.
However, the buy to let sector is still a lucrative investment, according to Marc von Grundherr, director of Benham and Reeves, as yields in many areas of the UK are holding firm.
‘Changes to stamp duty and tax thresholds have had a notable impact but an inadequate level of suitable rental stock will ensure rental growth remains buoyant as demand exceeds supply.
After June we may see a further unsettling of the sector with the introduction of a ban on lettings fees and it will be interesting to see how the dynamic shifts between tenant, landlord and agent and whether this has an immediate impact on the cost of owning or renting a buy to let property,’ he said.
