Average rent prices on a new letting in the UK rose by just 0.24% in the first half (H1) of 2017, which is just a third of the 0.79% growth recorded during the same period last year, shows the latest data from Landbay.
But while there remains marginal growth, the figures from the Landbay Rental Index show that London is the only region to have recorded decreases in rent prices, with June marking one full year since monthly rent changes in the capital first entered negative territory.
Rent prices in London dropped by an average of 0.59% in H1 and were down by 1.01% in the 12 months to the end of June. This compares to growth of 0.69% across the rest of the UK in H1 and 1.59% over the past 12 months.
Just nine London boroughs are still seeing rents rise, with Havering (0.73%), Waltham Forest (0.61%), Bexley (0.58%), Barking and Dagenham (0.41%), and Enfield (0.20%) experiencing the greatest uplift in rent prices over H1.
Although rent price growth remains in positive territory outside of the capital, there has been a notable deceleration in growth in many parts of Britain.
Should the overall trend continue into H2, UK rents would begin to drop, declining by 0.08%. Excluding London, trend analysis suggests that rental growth would continue to flatten, slowing to 0.60% from 0.69%, while rents in the capital would continue to fall, decreasing by 1.32%.
Although overall rent prices are slowing, some parts of the country continue to record robust growth; tenants in Edinburgh saw rents rise faster than anywhere else, at an average of 2.19%, followed by 1.89% growth in Peterborough and 1.86% in East Lothian.
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The CEO and Founder of Landbay, John Goodall, comments on the latest report: “While there remains a huge degree of regional variation, the overall trend has been a slowing of rents across the UK, most markedly in London, where we’ve now seen a full year of falling prices.
“Wherever they’re based, landlords have had to face a catalogue of challenges over the past two years, from stricter regulation, a reduction in tax reliefs, and a significant Stamp Duty tax spike when buying a buy-to-let property. Yet, despite these disincentives, there has been little sign of them leaving the market, and even less of them passing on these costs to tenants in the form of higher rents.”
Nevertheless, he predicts: “Looking ahead, however, this trend is unlikely to continue. Demand for rental properties can be expected to increase as we come out of the seasonal summer slowdown, and October’s PRA [Prudential Regulation Authority] changes give landlords yet another incentive to push through transactions before the new regulations kick in.
“The changes will require any landlord with more than four properties to be assessed against their full portfolio when applying for finance. There’s no avoiding the extra workload this will cause in the short term, and lenders and brokers alike should be preparing for both a rush to beat the deadline and also the extra valuations work that will need to be done on the other side. Rents may be decelerating, but brokers will need to keep their foot on the gas throughout H2 and beyond.”