Rent price growth has experienced a slowdown since the end of 2015, according to December 2017’s Index of Private Housing Rental Prices from the Office for National Statistics (ONS).
The slowdown in the growth of private rent prices in Great Britain has been driven mainly by a decline in London over this period.
On an annual basis, the average rent price paid by tenants in Great Britain grew by 1.2% in December – down from 1.4% in November. Rent prices for Great Britain excluding London rose by an average of 1.7% in the 12 months to December – down from 1.8% in November. The annual rate of growth for London (0.4%) in the year to December was 0.8 percentage points below that of Great Britain. This is the lowest annual growth in the capital since October 2010.
The Royal Institution of Chartered Surveyors’ (RICS’) Residential Market Survey for November 2017 reported that demand from prospective tenants weakened, while new landlord instructions also continued to drop.
ARLA Propertymark (the Association of Residential Letting Agents) reported in its Private Rented Sector Report for November that the number of tenants experiencing rent rises dropped to the lowest level seen since its records began three years ago. It also noted an increase in the number of tenants successfully negotiating rent reductions.
Between January 2011 and December 2017, private rent prices in Great Britain rose by an average of 15.5%. This was strongly driven by the historical growth in rents within London. However, when the capital is excluded from these figures, rents increased by an average of 11.8% over the same period.
In England, private rents grew by an average of 1.3% in the 12 months to December – down from 1.4% in November. The annual growth rate for England is the lowest since January 2011, when it was also 1.3%.
The annual rate of change for Wales (1.7%) in December is now higher than in England (1.3%) and Great Britain (1.2%). Wales has shown a broad increase in its annual growth rate since July 2016. The annual growth rate for Wales is the highest since the series began in 2010.
Rent price growth in Scotland stood at an average of 0.4% in December – up from 0.2% in November. This weaker growth may be due to stronger supply and weaker demand north of the border, as reported by ARLA Propertymark.
All of the countries that constitute Great Britain have experienced growth in their average rent prices since 2011. Since January 2011, rent prices in England have increased more than those in Wales and Scotland.
Growth in rent prices in London stood at an average of 0.4% in the year to December – down from 0.6% in November. The RICS reports that near-term expectations are still negative in the capital – an ongoing trend dating back to August 2016.
Focusing on the English regions, the highest annual rent price increase was in the East Midlands in December (2.6%) – down from 2.7% in November. This was followed by the East of England (2.2%) – up from 2.1% – the South West (2.1%) – unchanged from November – and the South East (2.0%) – down from 2.3%.
The lowest annual rent price growth was seen in the North East (0.1%) – up from 0.0% in the previous month – followed by London (0.4%) – down from 0.6% – the North West (1.3%) –unchanged from November – Yorkshire and the Humber (1.4%) – down from 1.6% – and the West Midlands (1.8%) – unchanged from the previous month.
Simon Heawood, the CEO of online investment platform Bricklane, comments on the figures: “Political discussion of the housing crisis has largely been focused on the supply side. But there will be no quick fixes to the structural problems of undersupply and, in the interim, it is vital to keep focused on conditions in the buy-to-let market. The Housing Standards private member’s bill currently going through Parliament gives us the opportunity to debate the best ways to drive up rental standards and protect tenants’ rights. We think the legislative backdrop for amateur landlords will only become more onerous, favouring consolidation of rental properties in the hands of professionalised operators, able to manage at scale and to a certain standard.”
The Operations Director of Haart estate agent, Paul Sloan, also reacts: “Rents are rising, but at a slower rate than before. This is good for both landlords and tenants. A rise of between 1.3-1.4% in England is sustainable. Landlords have got some capital growth and will benefit from higher yields, but it is also good news for tenants that increases are modest – at least until the proposed ban on tenant fees is introduced. Wages are likely to be rising by more than rents and, realistically, landlords are unlikely to put up rents on an existing tenancy by 1%. If they have good tenants, they are likely to wait and increase it by 5% later down the line, or just increase the amount for any new tenancies.”
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