Rental growth slows during September

Rents in the UK increased by just 3% in the year to September, this slowest annual growth rate recorded so far in 2016.

Latest analysis from HomeLet also indicates that tenants signing a new agreement in September agreed an average rent of £910 per month.

Ups and downs

Whilst rents are up by 3% from last year, it represents a monthly drop of 0.8% in comparison to August. Rental price inflation has fallen from a high point of 4.5% in March 2016, with the rate of increase falling in each of the last three calendar months.

This slower rate of growth suggests small decreases in average rents across the UK, which could indicate that affordability thresholds are being reached.

Martin Totty, HomeLet’s Chief Executive Officer, 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.’[1]

Inflation

Private rental sector inflation is now less than house price inflation, with relative affordability of rented owner ownership improving.

The future of the rental market is still uncertain, with factors such as mortgage interest tax relief and Brexit looming.

Despite the rate of annual rental growth slowing, the September 2016 HomeLet Rental Index shows that rents are up year-on-year in 10 of the 12 regions.

Of the regions that have not seen yearly rental growth, Scotland recorded a 1.7% annual decrease, while rents in the North-East were unchanged.

Mr Totty concluded by saying: ‘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.’[1]

[1] http://www.propertyreporter.co.uk/landlords/uk-rental-growth-slows-further.html