Outside of London the average monthly rent is now £708, according to the HomeLet index which also shows that Plymouth, Cardiff and Leeds most affordable major cities to rent in the UK while London, Edinburgh and Birmingham are least affordable.
Overall the rents landlords are charging on new tenancy agreements are continuing to fall across the UK with rental prices dropping in seven out of 12 regions of the country in October 2014.
While rents for new tenancies in October were still higher than in the same month of 2013, HomeLet has now recorded lower rental prices in each of the past three months in many regions, indicating a cooling in the rental market.
Regions that have previously recorded high growth such as Greater London, East Anglia the South East and the South West of England are now recording falling rental prices.
In Greater London, for example, rents levied on new tenancies signed in October 2014 were 3.8% lower than September 2014. In the South East, rents fell 3.1% and in East Anglia prices dropped 5.4%, while the South West saw the biggest monthly drop with rents falling by 9.3%
Meanwhile, in areas of the country where rents have not been rising quite so fast, October saw continued growth. In the North East of England, rents on new tenancies rose by 3.8% in October and in the East Midlands, October’s increase was 3.4%.
A breakdown of the figures show that in Scotland the average monthly rent it £587, down 4.4% month on month but up 2.6% annually while in Wales it is £597, down 1% month on month and up 3.3% year on year. Northern Ireland saw monthly rents fall 6.3% to £578 but up just 0.9% year on year.
The average monthly rent in East Anglia is £781, down 5.4% compared with September but up 8.5% annually. In the South West it is £787, down 9.3% month on month and up 3.6% annually while the South East saw rents fall 3.1% to £880, an annual rise of 7.3%.
In the North West rents increased by 1.7% on a monthly basis to £671 and are up 7.5% year on year. Yorkshire and Humberside also saw a monthly rise with rents up 0.2% to £608 and up 4.8% annually.
In the North East rents increased by 3.8% to £528 and are up 2.3% year on year while the West Midlands saw a rise of 0.6% to £660 but rents are 11.7% higher than a year ago. The East Midlands also saw a rise with rents up 3.4% to £605 and up 2.9% annually.
London, which tends to be on a different trajectory to the rest of the country, saw rents fall by 3.8% compared to September, taking the average monthly rent to £1,411. Rents in the city are up 8.5% year on year.
According to Martin Totty, chief executive of Barbon Insurance Group which owns HomeLet, the divide between areas that previously registered fast growing rents and those where increases were more modest suggests that the market may be levelling out geographically.
‘All around the UK, landlords continue to make sensible decisions about the ability of tenants to pay rents. The recent easing in the rental sector mirrors to some extent the autumn cooling of the house purchase market, where house price increases have begun to ease in recent months,’ he said.
‘However, with house prices having previously increased sharply in most parts of the country and little sign of an improvement in credit conditions, the rentals market looks set to continue benefiting from demand from large numbers of people priced out of buying. Rents may not continue to grow at the pace seen over the past year, but the outlook remains attractive for landlords,’ he added.
This month, HomeLet has also produced an analysis of the most and least affordable cities in which to rent by tenant income to rent ratio.
London tops the table as the most unaffordable major city in the UK, with monthly rent commanding 49% of the average tenant’s income. Edinburgh and Birmingham follow close behind with tenants paying out 47% of income towards monthly rent payments.
By contrast, Plymouth, Cardiff and Leeds offer much better value for tenants with more favourable ratios between average tenant income and rental prices at 27%, 29%, and 34% of income respectively.
‘Our analysis of the affordability of renting in the UK’s major cities has produced some surprising results. In some parts of the UK, such as Scotland and East Anglia, where rental prices are now falling or stagnant, the data tells us that renting in some cities in these regions is still stretching tenant affordability. The data has also revealed some unexpected pockets of rental affordability where tenant income is keeping greater pace with rental prices,’ explained Totty.
‘Looking at the city data against the regional and national picture would suggest that areas that were previously very much the domain of home buyers, are becoming popular areas for renters too, as families move out of cities for a better quality of life but are unable to join the property market,’ he pointed out.
