The average rent of a new letting in the UK grew by 0.24% in the first six months of 2017, a third of the pace of growth recorded in the first half of 2016, the latest index shows.
The slowdown, which began in April 2015, suggests that the supply of rental accommodation is still high, and that landlords have yet to leave the market inforce despite tax changes, according to the Landbay index.
London has led the rest of the UK in falling rents, down 0.59% in the first half of this year which is 12 months since month on month rental changes in the capital first entered negative territory while rents in Scotland have seen the least change, slowing by just 0.04% over the last year.
The index report says that if the trend continues, UK rents will begin falling in the second half of 2017, but increased landlord costs and rising tenancy demand are likely to buck this trend.
London is the only region in Britain to have seen rents actually fall and they are now down by 1.01% compared to a year ago. This compares to annual growth of 0.69% across the rest of the UK.
However, nine London boroughs are still seeing rents rise, with Havering up 0.73%, Waltham Forest up 0.61%, Bexley up 0.58%, Barking and Dagenham up 0.41% and Enfield up 0.20%.
Elsewhere there has been a notable deceleration in growth. In England, excluding London, rents increased by 0.70% in the first half of 2017, compared to 1.14% in the same period in 2016.
In Wales, growth slowed to 0.59% compared to 0.83% the year before, while in Scotland rental growth has remained fairly steady, slowing by only 0.04%, from 0.69% in the first half of 2016 to 0.65% in the first half of 2017 and in Northern Ireland they fell by 0.23%.
Edinburgh saw rents rise 2.19% year on year, Peterborough recorded growth of 1.89%, East Lothian was up 1.86% and the East of England up 1.1%.
The report points out that should the overall trend continue into the second half of 2017, rents would begin to fall to -0.08%. Without London, trend analysis suggests rental growth would continue to flatten, slowing to 0.60% from 0.69%, while rents in the capital would continue to fall to -1.32%.
‘While there remains a huge degree of regional variation, the overall trend has been a slowing of rents across the UK, most markedly in London, where we’ve now seen a full year of falling prices,’ said John Goodall, chief executive officer of Landbay.
‘Wherever they’re based, landlords have had to face a catalogue of challenges over the past two years, from stricter regulation, a reduction in tax reliefs, and a significant stamp duty tax spike when buying a buy to let property. Yet despite these disincentives, they has been little sign of them leaving the market, and even less of them passing on these costs to tenants in the form of higher rents,’ he explained.
He pointed out that demand for rental properties can be expected to increase and October’s PRA changes give landlords yet another incentive to push through transactions before the new regulations kick in. The changes will require any landlord with more than four properties to be assessed against their full portfolio when applying for finance.
‘There’s no avoiding the extra workload this will cause in the short term, and lenders and brokers alike should be preparing for both a rush to beat the deadline and also the extra valuations work that will need to be done on the other side. Rents may be decelerating, but brokers will need to keep their foot on the gas throughout the second half of the year and beyond,’ he added.
