Rents for new tenancies in the UK have begun to rise at a rate not seen in the market for over two years, up 3.3% in the 12 months to March 2019, the latest index shows.
There is a move away from the normal fluctuations in the private rented sector so that rental growth is now higher than inflation, according to the data from the HomeLet rental index.
Growth has taken the average rent in the UK to £942, but when London in excluded, the average rent is £782, up 3% year on year while average rents in London rose by 2.8% to £1,613.
Eight regional ‘hotspots’ showed an increase in rents of more than the UK average over the first three months of 2019 and year on year the region with the largest increase was the South West, up 5.8%.
All 12 of the regions monitored by HomeLet showed an increase in rental values between March 2018 and March 2019.
‘With the Tenant Fees Act due to take effect in England from 01 June, the acceleration we’re seeing in agreed rental values will come as no surprise to anyone,’ said Martin Totty, chief executive of HomeLet.
‘Whilst the aim of the Tenant Fees Act is to reduce the costs that tenants can face, landlords still need to cover the costs that are incurred when setting up a tenancy. With landlords already feeling the impact of taxation changes, the expectation is that costs will be passed back to tenants through higher rents, particularly for new tenancies,’ he explained.
He pointed out that landlords’ ability to increase rents will largely be determined by local market dynamics of supply and demand for property. Regional hotspots, where rents are increasing faster than the UK average over the first three months of 2019 when compared to last year include Wales, Yorkshire and Humberside, the West Midlands, the North East and West, the South East and West, as well as Greater London.
‘Recently released annual results from a number of major quoted property agents point to a resilient private rented sector in contrast to a subdued sales market. With a still unclear outcome of the Brexit political impasse and the increasing prospect of a further extended delay in the UK exiting the European Union, the contrasting fortunes of the two main segments of the housing market seem likely to continue for some time,’ Totty also pointed out.
‘If demand for rental property remains strong, coupled with the lower frictional costs of moving between rental properties for tenants from 01 June, landlords may yet be able to recover the additional cost burden they will face by edging up rents. This will likely require the current high levels of employment and real wage growth being sustained,’ he said.
But he believes that it could be the case both tenants and landlords get what they want as tenants are relieved of the onetime up-front burden of fees at the beginning of a new tenancy and instead landlords meet these costs and recover them over time via gradual increases to monthly rents.