Average rents across the country rose in every UK region in January, for the first time in almost two years, according to the latest Rental Index from Landbay, powered by MIAC.
The average rent rose by 0.07% in January, marking what is expected to be the start of a year of sustained rent price growth for the UK.
The average UK rent price now stands at a record £1,198 per month – up by 0.66% on January 2017. While rents in the capital (£1,876) remain around 2.5 times higher than the rest of the UK (£760), January’s average for London is still £16 a month shy of the £1,893 record set in May 2016.
Much has been made of sinking rents in London, which have dropped in every month since that peak was recorded almost two years ago. However, the capital is no longer exerting such downward pressure on the national average. The average rent in London grew by 0.03% in January, softening the year-on-year decline to 0.54%.
While every region experienced rising rents in January, the speed of rent price growth has not been consistent across the UK. At a country level, Wales (0.10%) recorded the highest rental growth, while Northern Ireland (0.01%) lagged behind.
On a regional basis, the East Midlands experienced rent price growth of 0.18% in January alone, followed by the East of England (0.13%). Meanwhile, rents in the North East paralleled the 0.03% growth seen in London.
Recent forecasts from Savills suggest that rents will rise by 2.5% this year and by a cumulative 15.5% over the next five years. These predictions reflect the current state of the buy-to-let sector, which has faced a number of tax and regulatory changes that threaten to exert upward pressure on rents. If rents do continued to rise, it suggests that the increased cost and compliance pressures on landlords are beginning to flow through into higher rents for their tenants.
John Goodall, the CEO and Founder of Landbay, comments on the report: “With all the tax and regulatory changes landlords have shouldered over the past couple of years, an uplift in rents has been on the cards for a while, and is likely to continue into 2018. Stamp Duty changes pushed up transaction costs for landlords back in 2016, as have a raft of new regulations from the PRA [Prudential Regulation Authority] landing in 2017.
“Furthermore, the Bank of England’s Term Funding Scheme comes to an end this month, pulling away one of the crutches that has allowed many mainstream lenders to keep mortgage rates so low. This, together with gradually rising interest rates, will eventually push up borrowing costs for banks and, consequently, for landlords, who will have to pass some of these costs onto tenants in the form of higher rents.”
He continues: “Landlords who turned their backs on London when rents started to dwindle may now want to reconsider. House prices have declined in the capital for four consecutive months and, combined with positive rental growth of 0.03% in January, yields will now be climbing.”
The Landbay figures contrast to recent data from the National Landlords Association (NLA), which indicates that many landlords are being forced to reduce rents in order to attract new tenants.