UK rents rose by an average of 1.1 per cent during July, a welcome return to positive inflation.
New data from the HomeLet Rental Index revealed the that the average rent agreed on for a new tenancy signed in July reached £925. This is up significantly on the £915 recorded in July 2016.
The 1.1 per cent annual increase compares favourably to declines of 0.3 per cent and 0.2 per cent in May and June respectively, the first time rents had fallen in the UK since 2009. However, positive inflation in the buy to let sector remains lower than the general rate of inflation, which stood at 2.7 per cent in June.
The rental market in Greater London is slowing the nation’s positive trend, with inflation in the capital at -0.6 per year. July marked the fourth consecutive month to see a slowdown in London rents. This is in sharp contrast to the 6.6 per cent positive trend recorded last year.
Outside London, there has been a stronger trend towards positive inflation. Northern Ireland saw the highest rate of growth, at 5.7 per cent in comparison to July 2016, followed by Scotland at 3.6 per cent. Only the South East and North East saw decline at -0.9 per cent and -1.7 per cent respectively.
HomeLet’s Chief Executive Officer, Martin Totty said: ‘It’s 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. 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 per cent on this time last year.’
He continued: ‘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. We know housing stock for sale is in short supply and the Bank of England has expressed concerns about the ‘credit overhang’ and lenders’ resilience should economic activity start to slow. At the very least, these factors should not be unhelpful to the rental sector in the immediate future, encouraging landlords to stick with property owning as an asset class, with potential still to provide relatively attractive returns compared with alternative investment choices.’