Average rent in London £1563 and elsewhere £771
Rents in the UK continued to rise over three months to May 2016, although increases slowed more in line with house price growth, according to the latest index report.
Average rent in the UK, excluding Greater London, is now £771 per month, some 4.4% higher than a year ago while the average rent in London is £1,563, up 6.2%.
The data from the HomeLet rental index also shows that Scotland leads the way with rents rising faster than in any other part of the country.
The report said that the figures provide some encouragement for both landlords and tenants.
Landlords may have been expecting some impact from the increase in the supply of rental property in May, as those who rushed to complete buy to let property purchases before higher rates of stamp duty came into force in April 2016 began offering their properties to tenants. But HomeLet’s data suggests landlords continue to enjoy healthy rental yields after costs.
As for tenants, they will be encouraged to see the pace of rent rises now beginning to moderate, particularly compared to a year ago. While an average rise of 4.4% means increases are still running ahead of inflation, there is some evidence of moderation of the long term trend, perhaps as affordability ceilings are approached.
The slowing of the pace of rent rises in May is broadly in line with a similar cooling in the rate at which house prices are rising and may be part of a broader story about economic uncertainty ahead of this month’s referendum on the UK’ s membership of the European Union.
Nevertheless, the May 2016 HomeLet rental index reveals that rents continue to rise in almost every area of the country, with 11 out of the 12 regions surveyed seeing an increase over the three months to the end of May.
In Scotland, rents are currently rising faster than anywhere else in the UK, with new tenancies costing 10.6% more than in the same period a year ago. However, the East Midlands with a rise of 8.3% in rents compared to last year, is also showing strong gains.
London’s rental market, where the average rent on a new tenancy is now £1,563, up 6.2 per cent, also continues to see rents rise more quickly than in most other areas of the country.
The rental market is characterised by steady growth in rents as the number of tenants looking for property runs ahead of the supply in the market, according to Martin Totty, chief executive officer of Barbon Insurance Group, HomeLet’s parent company.
He pointed out that this remains the picture in most regions of the country. ‘While this growth has begun to slow, which tenants will welcome, landlords will also be encouraged by the vote of confidence in the sector evidenced by the increase in buy to let completions in the past few months,’ said Totty.
‘Short term factors can and do have an impact on the marketplace. As a market leader in tenant referencing, HomeLet has seen a noticeable increase in the applications for new tenancies, immediately after the rush to complete buy to let property purchases ahead of last month’s increase in stamp duty rates,’ he explained.
Totty also pointed out that it may be that uncertainty ahead of this month’s European Union referendum vote is a factor. Some people may even be choosing to rent rather than buy given the unpredictability of the outcome and its impact. ‘As we saw at the time of the 2008 financial crisis, house prices and rents are not immune from wider economic shocks,’ he said.
‘However, looking beyond shorter term factors, net population growth and the rising rate of employment remain the key demand side drivers for residential property and they look set to continue to run ahead of public and private sector initiatives to increase supply and keep pace,’ he added.