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UK rental price growth continues to cool, HomeLet says

Rents across the UK are continuing to cool down, according the HomeLet Rental Index.

The annual rate of rental price inflation fell to just 0.7% in January - down from 1.7% in December, suggesting that, at the existing rate of growth, we could see average UK rents start to fall over next few months.

The average UK rent for a new tenancy starting in January was £888 per month, which although higher than January 2015’s average of £882, is £4 lower when compared to December 2016, based on HomeLet’s data.

Annual rental price growth has dropped from a high point of 4.7% in June 2016 and the rate of inflation has now declined in each of the past seven months.

The reduction in the pace of rental price inflation is most marked in areas of the country where rents were previously increasing fastest.

In Greater London, annual rental price inflation was just 0.4% in January, compared to a peak of 7.1% last July. In the South East, annual rental price inflation is now negative, with rents on new tenancies agreed in January down by 0.6% compared to January 2016. As recently as last June, rents in the region were rising at a rate of 4%.

The latest falls in rental price increases are also likely to mean that rents are no longer running ahead of inflation as measured by the consumer price index.

Martin Totty, chief executive of Barbon Insurance Group, HomeLet’s parent company, commented: “Our data has been showing, for some time, that landlords do not feel able to raise rents on new tenancies at anything like the pace seen during 2015 and the first half of 2016. Now it is even possible that rents will begin falling, which would be unprecedented in recent times.

“Landlords and letting agents have clearly recognised concerns about the affordability of rising rents and are now being cautious about what they expect tenants to pay. However, with many landlords facing increasing costs in the months ahead, as the Government begins to cut back on mortgage interest tax relief, the sector faces a difficult balancing act.

“It remains to be seen if landlords feeling the pressure of tougher tax and regulation will be able to recoup these higher costs, as many in the industry had assumed. We see no sign of landlords panicking, and there is little prospect of an end to the long-term imbalance between supply and demand for residential property; still, with economic uncertainty adding to the unpredictability of the short-term outlook, landlords and tenants alike will be monitoring the marketplace very closely.”

Rental figures from the January 2017 HomeLet Rental Index

Region

Average rent in January

2017

Average rent in December

2016

Average rent in January

2016

Monthly variation

Annual variation

Northern Ireland

£602

£602

£575

0.1%

4.8%

Wales

£606

£605

£584

0.1%

3.8%

East of England

£893

£895

£873

-0.2%

2.3%

North West

£673

£668

£658

0.7%

2.2%

West Midlands

£658

£663

£648

-0.6%

1.6%

Yorkshire & Humberside

£615

£614

£607

0.2%

1.3%

Scotland

£606

£603

£599

0.5%

1.3%

Greater London

£1,497

£1,508

£1,490

-0.7%

0.4%

North East

£527

£530

£526

-0.6%

0.2%

South West

£791

£784

£791

0.9%

0.1%

East Midlands

£583

£585

£584

-0.4%

-0.3%

South East

£989

£998

£995

-0.9%

-0.6%

UK

£888

£892

£882

-0.4%

0.7%

UK excluding Greater London

£743

£744

£737

-0.1%

0.8%

Notes:

Based on new tenancies in January 2017

Based on new tenancies in December 2016

Based on new tenancies in January 2016

Comparison of average rent in January 2017 and December 2016

Comparison of average rent in January 2017 and January 2015

UK rental price growth continues to cool, HomeLet says

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