Rents bounce back in July but London weak – HomeLet

UK rental prices returned to growth in July, the first rise recorded for three months, according to the latest HomeLet Rental Index.

The figures show that the average monthly cost of a new tenancy rose to £925 per calendar month in July, up 1.1% from £916pcm in the corresponding month last year.

It is the first time since April that HomeLet's rental index has measured a rise in rent prices, following declines of 0.3% and 0.2% in May and June respectively. But inflation in the private rental sector continues to lag the general rate of inflation, which was 2.7% in June, the latest month for which official data is available.

HomeLet’s July Rental Index reveals that rents rose in nine out of the 12 regions of the UK covered by the research.

Rents rose fastest in Northern Ireland, increasing 5.7% year-on-year, followed by Scotland where rents are up 3.6%.

In contrast, London continues to lag the UK as a whole, with rents falling by 0.6% in July compared to July 2016; the average monthly rent in the capital now stands at £1,564pcm.

The South East and the North East also recorded declines of 0.9% and 1.7% respectively.

Overall, HomeLet’s data suggests landlords now feel more confident than in the spring about seeking higher rents on their properties – but also that they remain very aware of tenants’ ability to pay. 

But with fewer homes coming onto the rental market, there is every chance that rents could increase further in the coming months as demand continues to exceed housing supply.

Martin Totty, chief executive of Barbon Insurance Group, HomeLet’s parent company, said: “It’s often been the case in recent times that rents have strengthened over the summer period. It’s a time when renters contemplate moving, demand increases, tenancy terms are set, and when the anniversary of the tenancy often occurs. This year, that ‘seasonal’ factor brings some relief for landlords, who’ve endured a gradual erosion in rent prices over many months.

“At the same stage last year, the South East was the main driver of UK average rents. This time around it’s regions throughout the country leading the strengthening in rents. If we exclude the London region, the average UK rent for a private rental property has hit a new high of £769 a month, up 1.6% on this time last year.”

Totty added: “Whether the market has now found some equilibrium remains to be seen, but landlords at least will be grateful for even some short respite. Predicting where the market heads from here is very difficult given the number of competing forces impacting the sector, either already being felt or still being contemplated.

“We know housing stock for sale is in short supply and the Bank of England has expressed concerns about the ‘credit overhang’ and lenders’ resilience should economic activity start to slow. At the very least, these factors should not be unhelpful to the rental sector in the immediate future, encouraging landlords to stick with property owning as an asset class, with potential still to provide relatively attractive returns compared with alternative investment choices.”

Rental figures from the July 2017 HomeLet Rental Index

HomeLet Rental Index Regional Variance Figures for July 2017

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