Rental price inflation has returned in the UK, rising by 1.1% in July compared to the same month a year ago, the first increases seen for three months; the average monthly rent now stands at £925. London continues to lag the UK as a whole, with rents falling by 0.6% in July compared to July 2016; the average monthly rent in the capital now stands at £1,564. HomeLet's July Rental Index reveals that rents rose in nine out of the 12 regions of the UK covered by the research.
Rents in the UK rose by an average of 1.1% during July, new data from HomeLet reveals, a return to positive inflation following two successive months in which rents fell. 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.
July's 1.1% annual increase compares to declines of 0.3% and 0.2% in May and June respectively, the first time rents had fallen in the UK since 2009. Nevertheless, 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 inflation in the capital now running at -0.6% a year according to the July HomeLet Rental Index. July was the fourth successive month in which London saw rents fall, and while the pace of decline is now slowing – July's figure compares to a 2.9% drop in June – the capital's rental market still looks transformed compared to this time last year, when rents were rising at a rate of 6.6%.
Outside of London, rental price inflation is significantly stronger, with nine out of 11 regions beyond the capital seeing higher rents last month. Rents rose fastest in Northern Ireland (up 5.7% compared to July 2016) and Scotland (3.6%), with only the South East (-0.9%) and the North East (-1.7%) recording declines. As a result, rental price inflation across the UK but excluding London is now running at a much faster rate of 1.6%. HomeLet's regional data is available in more detail via an online interactive infographic.
HomeLet's 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.
Commenting on the research, 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% on this time last year."
Martin Totty added: "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."
Rental figures from the July 2017 HomeLet Rental Index
HomeLet Rental Index Regional Variance Figures for July 2017