The average rate of rent growth in the UK is falling and could continue to do so over the next few months, an unprecedented trend in recent times, according to the latest home rental index.
Rents in January were just 0.7% higher than a year ago, down from a peak of 4.7% seven months ago and down 0.4% month on month with values falling in six out of 12 regions led by the South East of England.
The data from the HomeLet index also shows that the average monthly rent in the UK is now £888, rising to an average of £1,497 in Greater London. The decline means that UK rental price inflation has now dropped in each of the past seven months. At the peak of the market in June 2016, rents were increasing at an annual rate of 4.7%.
The data suggests that, at the current rate of growth, average UK rents could begin to fall over the next few months. In the South East, annual rental price inflation is already negative, with rents on new tenancies agreed in January down by 0.6% compared to January 2016. As recently as last June, rents in the region were rising at a rate of 4%.
The latest falls in rental price inflation are also likely to mean that rents are now rising at a slower pace than inflation generally. With rental price inflation also lagging average pay growth, this represents good news for tenants concerned about affordability in the private rental sector, according to Martin Totty, HomeLet’s chief executive officer.
‘Our data has been showing, for some time, that landlords do not feel able to raise rents on new tenancies at anything like the pace seen during 2015 and the first half of 2016. Now it is even possible that rents will begin falling, which would be unprecedented in recent times,’ said Totty.
‘Landlords and letting agents have clearly recognised concerns about the affordability of rising rents and are now being cautious about what they expect tenants to pay. However, with many landlords facing increasing costs in the months ahead, as the Government begins to cut back on mortgage interest tax relief, the sector faces a difficult balancing act,’ he explained.
‘It remains to be seen if landlords feeling the pressure of tougher tax and regulation will be able to recoup these higher costs, as many in the industry had assumed. We see no sign of landlords panicking, and there is little prospect of an end to the long term imbalance between supply and demand for residential property. Still, with economic uncertainty adding to the unpredictability of the short term outlook, landlords and tenants alike will be monitoring the marketplace very closely,’ he added.
