Lettings News

Rental Market Slowed over the Past Year, New Index Shows

Rose Jinks - November 13, 2017
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A new economic index, created by academics and based on a database of millions of properties, has shown that the average UK rent increased by £11.55 (or 1.51%) over the past year.

The Rent Index from The Deposit Protection Service (The DPS) – published for the first time today – is based on the UK’s largest tenancy deposit protection provider’s database of rent prices across the UK over the last ten years. Its figures show that, between the third quarters (Q3) of 2016 and 2017, the average rent rose to £775.13 per month – the slowest rate of growth for five years.

The DPS’s figures also show that the rate of rental growth was slower when compared to inflation than in any other year since the Global Financial Crisis (GFC) between Q3 2008-09, and that rents rose more slowly than inflation (by 1.19%) for the first time since 2013 (when it was 0.46%) slower).

Julian Foster, the Managing Director of The DPS, comments: “Figures suggest that the rental market has slowed nationally since Q3 2016, and letting agents, landlords and tenants will be keen to see whether this trend continues over the next year.

“This post-Brexit increase is the smallest witnessed since 2012 and comes after three years of particularly high growth, suggesting the influence of other macroeconomic factors such as housing, employment and inflation.”

He adds: “While we are still some distance from seeing the roughly 3% fall that came with the last Financial Crisis, the change over the last year identified by the index represents a significant shift for the market.”

The index was developed by Joe Nellis, a Professor of Global Economy, who was jointly responsible for the research and development of the UK’s leading house price measurement systems – the Halifax and Nationwide house prices indices – and Catarina Figueira, a Professor of Applied Economics and Policy, both of Cranfield School of Management.

Nellis says: “The DPS Rent Index should be viewed as an important indicator in understanding trends within the UK economy, and is particularly useful in analysing the property, housing and private rented sectors.

“Based on a unique, massive and hitherto untapped pool of data, and applying a thorough academic methodology, the index should be regarded as an invaluable source of information on rent prices and trends across the UK.”

The rise in the average UK rent was significantly smaller than the previous year (£21.92 or 2.96% between Q3 2015 and Q3 2016), as well as the previous two years (£25.83 or 3.75% between Q3 2013 and Q3 2014, and £27.56 or 3.86% between Q3 2014 an d Q3 2015).

The DPS’s historic figures also show that the average UK rent is now £157.69 (21.55%) more expensive than a decade ago and represents 32.59% of the median monthly salary (£2,378.07).

This is a slight decrease on the previous year (by 0.16%), but the ratio remains higher than at any other time over the previous ten years and is 1.54% higher than it was ten years ago.

For the first time since the period between Q3 2012 and Q3 2013, rents rose at a slower rate than the average UK monthly wage – doing so by the most significant margin than any year since the GFC.

The slowdown was also felt in London, where the average rent increased by just £8.20 (0.62%) between Q3 2016 and Q3 2017 to £1,326.09 per month – the smallest rise since the GFC.

Rent in London now represents 43.10% of the median salary for the region – the highest across the whole of the UK.

For the second consecutive year, rent prices in the capital increased at a slower rate than salaries (2.25%).