Annual rental growth slowed to 3% in September, which is the lowest rate of increase this year, HomeLet’s latest Rental Index has found.
Average UK rent now stands at £910 per month, which although higher than last year is £3 lower when compared to August.
Rental price inflation has fallen from a high-point of 4.5% in March 2016 and the rate of increase has now dropped in each of the past three months. This slowing rate of growth reflects modest decreases in average rents in many areas of the country, which may suggest that the market is reaching overall affordability thresholds.
Despite the slowdown, the September 2016 HomeLet Rental Index reveals that rents rose in 10 out of the 12 regions surveyed recording an increase over the year to the end of September, with Scotland the only region to see annual rents fall, down 1.7% year-on-year, while rents in the North East remained unchanged.
Martin Totty, chief executive of Barbon Insurance Group, HomeLet’s parent company, said: “Landlords are being very careful to ensure rents remain affordable for tenants. Despite factors such as higher stamp duty on purchases for buy-to-let investors, and the tax changes coming in from April 2017, it would appear so far landlords have absorbed any actual or expected decreases in their yields, rather than pass this on through higher rents.”
Inflation in the private rental sector is now running behind house price inflation and relative affordability of rented over ownership has improved.
Totty continued: “Whether those impacted can afford to continue to keep rents stable may depend on other variables, such as mortgage interest rate movements. These tend to be determined by factors such as general inflation outlook and central authority interest rate responses. It seems a complex cocktail of external factors could now begin to play a role in determining the future direction of rents in a ‘pre-Brexit’ economy.
“Landlords and tenants alike will need to monitor the market carefully as we get closer to the April 2017 reduction in tax relief on buy-to-let mortgage interest.
“The recent trends in rental values appear to be changing which may yet prove beneficial for both tenants and landlords if it reflects some rebalancing between yields and affordability. Both are important for the proper functioning of the increasingly important private rented sector.”
Rental figures from the September 2016 HomeLet Rental Index
|Region||Avg Rent Sept '16||Monthly variation||Annual variation|
|East of England||£904||-0.4%||4.7%|
|Yorkshire & Humberside||£621||-0.8%||2.2%|
|Notes:||Based on new tenancies in September 2016||Comparison of average rent in September 2016 and August 2016||Comparison of average rent in September 2016 and September 2015|