Rent price growth across Great Britain continued on the slowdown that has been seen since 2015 in August this year, according to the latest Index of Private Housing Rental Prices (IPHRP) from the Office for National Statistics (ONS).
The average price paid by a private tenant in Great Britain rose by just 0.9% in the year to August, which is unchanged from July 2018. This slowdown in the growth of private rent prices has been driven mainly by the downward trend seen in London.
Excluding London, the average rent price increased by 1.5% annually in August, which is also unchanged on the previous month.
London rent prices dropped by an average of 0.3% in the year to August, again unchanged from the rate recorded in July.
Supply and demand
The Royal Institution of Chartered Surveyors (RICS) reported in its August 2018 Residential Market Survey a continuing decline in new landlord instructions for the 23rd consecutive month. The organisation notes that the implication of this feedback is that the supply of new rental stock to the market is increasingly constrained, with demand remaining resilient.
Similarly, ARLA Propertymark’s (the Association of Residential Letting Agents) July 2018 report found that the supply of rental properties has decreased, while tenant demand was at its highest level for the year so far. These supply and demand pressures can take time to feed through to the IPHRP, which reflects price changes for all private rental properties, rather than just those newly advertised on the market.
Rent Price Growth Continues the Slowdown Seen since 2015
The annual rate of growth for Wales in August 2018, 1.0%, is still marginally higher than the annual rate of change for England (0.9%) and Great Britain (0.9%). Wales showed a broad increase in its annual growth rate between July 2016 and the end of 2017, but has fallen back during 2018.
This slightly stronger growth in Wales may be a response to higher levels of tenant demand in the country, as reported by ARLA Propertymark.
In England, private rent prices grew by an average of 0.9% in the 12 months to August, which is unchanged from July 2018. When London is excluded from England, prices were up by 1.6% on average.
Rent price growth in Scotland stood at an average of 0.5% in the year to August, unchanged from July. The historic weaker growth since mid-2016 may be due to stronger supply and weaker demand north of the border.
The annual rate of change for Northern Ireland (1.7%) in June 2018 was higher than the other countries of the UK. Northern Ireland has seen an increase in its annual growth rate between the end of 2016 and the end of 2017, but has fallen back slightly in 2018.
In London, rent prices were down by 0.3% in the 12 months to August, which is unchanged from July. However, the RICS reports that expectations are now positive in the capital for the first time since August 2016. This may feed through to the IPHRP over time.
The largest annual rent price growth of English regions was seen in the East Midlands in August (2.8%), up from 2.7% in July. The South West followed (2.1%), with the East of England in third place (1.9%).
The lowest annual rent price growth was in London, followed by the North East (0.2%).
Kate Davies, the Executive Director of the Intermediary Mortgage Lenders Association (IMLA), responds to the index: “While rent increases are subdued over the last 12 months, it is likely that this will only be a temporary respite. The cumulative impact of successive government regulation implemented two years ago, namely the 3% Stamp Duty surcharge and the removal of mortgage interest tax relief, means we may soon start to witness a more pronounced impact on the sector. Reduced landlord investment could ultimately result in supply shortfall and upward pressure on rents.
“Regulatory demands have already led to an 80% fall in new buy-to-let investment from 2015 to 2017. Our latest research has found that 35% of intermediary mortgage lenders have restricted lending to buy-to-let investors, as more landlords are failing to meet current eligibility criteria.
“The full impact of the changes has yet to work through – so now is not the time for the Government to introduce further change for the sector.”