New tenancy rents up 1.1% in July in UK after two months of falls, latest index shows
Rental values on new tenancies agreed in the UK’s private rented sector increased by an average of 1.1% in July after two successive months in which rents fell, the latest index shows.
The average rent agreed on a new tenancy signed during July was £925 according to the July HomeLet rental index, compared to £915 in the same month of 2016 after falls of 0.3% and 0.2% in May and June respectively, the first time rents had fallen in the UK since 2009.
But the index report points out that inflation in the private rental sector continues to lag the general rate of inflation, which was 2.7% in June, the latest month for which official data is available.
The Greater London rental property market continues to act as a brake on the UK as a whole, with rental values now down 0.6% year on year, the fourth successive month in which London saw rents fall.
The report points out that while the pace of decline is now slowing, July’s figure compares to a 2.9% drop in June, London’s rental market is still very different from a year ago when rents were rising at a rate of 6.6%.
Outside of London nine out of 11 regions covered by the index recorded higher rents last month. Rents rose fastest in Northern Ireland, up 5.7% compared to July 2016, and Scotland up 3.6%, with only the South East and the North East recording declines of 0.9% and 1.7% respectively.
The report explains that the data suggests landlords now feel more confident than in the spring about seeking higher rents on their properties but also that they remain very aware of tenants’ ability to pay.
The July data may also reflect a decrease in the number of homes coming onto the rental market, with research from organisations such as the Association of Residential Letting Agents suggesting fewer landlords have acquired new rental properties in recent months. A similar effect has been seen in the housing market, where weaker prices stabilised in July as fewer properties were put up for sale.
‘It is often been the case in recent times that rents have strengthened over the summer period. It’s a time when renters contemplate moving, demand increases, tenancy terms are set, and when the anniversary of the tenancy often occurs. This year, that seasonal factor brings some relief for landlords, who’ve endured a gradual erosion in rent prices over many months,’ said HomeLet’s chief executive officer, Martin Totty.
‘At the same stage last year, the South East was the main driver of UK average rents. This time around it’s regions throughout the country leading the strengthening in rents. If we exclude the London region, the average UK rent for a private rental property has hit a new high of £769 a month, up 1.6% on this time last year,’ he pointed out.
‘Whether the market has now found some equilibrium remains to be seen, but landlords at least will be grateful for even some short respite. Predicting where the market heads from here is very difficult given the number of competing forces impacting the sector, either already being felt or still being contemplated,’ he added.
He also pointed out that homes for sale is in short supply and the Bank of England expressing concerns about the ‘credit overhang’ and lenders’ resilience should economic activity start to slow, these factors could boost the rental market, encouraging landlords to stick with property owning as an asset class, with potential still to provide relatively attractive returns compared with alternative investment choices.
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