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Residential rents rise modestly across most of the UK, latest index shows

Residential rents in the UK rose at a modest pace during August, up by an average of 3.1% year on year to an average of £913 per month, the latest index shows.

Those signing up to a new tenancy saw rents rise in almost every are of the country but there is regional variation according to the August HomeLet Rental Index.

The 3.1% recorded in August is comparable to annual increases of between 3.5% and 3.8% over the previous four months. By contrast, annual rental inflation was running at close to 6% a year ago.

Some 11 out of the 12 regions surveyed recording an increase in rents over the year to the end of August but London and the South East in particular saw a larger dip in the pace of rent rises during March and April this year, at a time when buy to let investors were purchasing properties in larger numbers ahead of higher stamp duty rates that came into force at the beginning of the 2016/2017 tax year.

A breakdown of the figures show that year on year rents increased by 5.8% in the East of England, by 5.2% in Wales, by 4.3% in the North West, by 3.3% in the West Midlands and the South East, by 2.8% in Northern Ireland, by 2.7% in Greater London, by 1.6% in the South West, by 1.3% in Yorkshire and the Humber, by 1.1% in Scotland, by 1% in the East Midlands and fell by 1.6% in the North East.

Month on month rents increased by 2.3% in the West Midlands, by 1.4% in Northern Ireland, by 1.3% in the South West, by 0.8% in Wales and the North West, by 0.7% in the South East, by 0.5% in the East Midlands and Yorkshire and the Humber, by 0.4% in Greater London and the East of England, but fell by 2.1% in Scotland and by 1.6% in the North East.

The highest average rent in August was £1,497 in Greater London, followed by the South East at £1,034, then £915 in the East of England, £799 in the South West, £699 in the North West, £674 in the West Midlands, £654 in Wales, £640 in Yorkshire and Humber, £629 in Scotland, £627 in Northern Ireland, £621 in the East Midland and £535 in the North East.

The index reflects a private rental market in which landlords are engaged in a delicate balancing act, according to Martin Totty, chief executive of HomeLet’s parent company Barbon Insurance Group.

‘Landlords are acutely aware of tenants’ concerns about affordability while also conscious of the need to achieve their target yields against a backdrop of rising costs. August’s figures suggest that rents are continuing to rise at a sustainable pace ahead of price inflation but well below house price increases, which were running at close to 6% according to the most recent data,’ he explained.

‘In the medium to longer term, the fundamental driver of rents will be the balance between demand and supply for rented property. We expect demand in the private rental sector to continue to grow, in line with demographic changes such as population growth, and as affordability concerns remain in the house purchase market, so it is important that we see efforts to support supply,’ he added.

August’s HomeLet Rental Index is the first to be published following a redesign of the benchmark, which is a comprehensive and widely followed index of the way in which rents are changing in the UK’s private rental sector.

New methodology, based on expert independent advice from Stephen Gibbons, a Professor of Economic Geography at the London School of Economics incorporates additional data on new tenancies, as well as capturing nuances such as property type and location. It has been applied retrospectively to HomeLet’s historical rental market data to ensure that the Rental Index can continue to be used to provide analysis of trends in the private rental sector.

‘HomeLet’s improvements to the Rental Index, introduced this month, reflect our determination to contribute to an informed debate about the future of the private rental sector. We’re confident that the additional data and analysis we have added to the index will enhance the data, allowing us more nuanced applications and ensuring that it delivers the maximum possible value to all those who use it. We wanted the index to continue to be the most widely followed rental market index,’ said Totty.