Rental prices paid by private tenants increased by 2.3% in the year to August 2016, according to the latest figures released by the Office of National Statistics.
This meant prices were down by 0.1% in comparison to July.
By country, rents increased by 2.4% in England and by 0.1% in Wales. Rent increases were unchanged in Scotland, having slipped from a high of 2.1% in the year to June 2016.
All regions of England saw an increase, with the South East seeing the largest rise of 3.4%, down from the 3.5% recorded in July. Since the beginning of 2012, rental prices in England has shown a yearly rise of between 1.4% and 3% year-on-year.
Investors with landlord insurance will be interested to find that the next largest rent price increase was in the East of England, showing a rise of 3.3%. London saw increases of 2.6%, down from the 3% recorded in July.
On the other hand, the lowest annual rent increases were evident in the North East, with prices increasing by 0.9%. The North West was next, with prices increasing by 1.1%. Yorkshire and the Humber recorded growth of 1.3%.
Data from the UK House Price Index shows that over a longer period, residential house price growth has been greater than rental increases. An average annual rate of house price inflation between January 2013 and August 2016 of 6% was recorded, in comparison to 2.1% for rental prices.
The Office of National Statistics states that inflation in the rental market is likely to have been caused by demand outpacing supply.
Steve Bolton, founder of Platinum Property Partners, believes that rents are likely to continue to grow. Bolton notes: ‘the surge in buy-to-let property purchases following April’s stamp duty changes has not had any discernible effect on the cost of renting and this trend isn’t likely to reserve any time, particularly as legislation planned for 2017 threatens to reduce rental stock and push prices even higher.’
‘The reduction of buy-to-let mortgage interest tax relief will make some landlords unprofitable, forcing them to pass on costs to tenants in the form of higher rents just to stay afloat. Even those who can still operate may be deterred from making further investments, reducing rental stock at a time of severe property shortage.’
‘Although depicted as the undesirable alternative to home ownership, rental accommodation is a service valued by many, particularly young professionals looking for flexible accommodation or those not ready to commit to the property ladder just yet. However, it’s important that tenants are not prevented from saving for the future by excessive rental prices,’ he concluded.