UK rental inflation down for seventh straight month

The most recent figures from Homelet have revealed that UK rents increased by an average of only 0.7% in January, in comparison to the same period in 2016.

This decline means that British rental price inflation has dropped in all of the seven months. The peak of the market in June 2016 saw prices rise by an annual rate of 4.7%.

Future Falls

At the current rate of growth, UK rents could begin to fall in the coming months.

Across Britain as a whole, the average rent for a new tenancy starting in January was £888pcm, in comparison to £882 in January 2016.

The most prominent slowdown in rental price inflation was evident in regions that had previously seen the greatest increases. In Greater London, annual rental price inflation was just 0.4% in January, in comparison to a peak of 7.1% in January.

In the South East, annual rental price inflation has now moved into negative figures, with rents for new tenancies in January down by 0.6% in comparison to last year.

These falls in rental price inflation are likely to mean that rents are increasing at a slower pace than inflation in general. As rental price inflation is also lagging behind average pay growth, this is good news for tenants worried about affordability in the private rental sector.

UK rental inflation down for seventh straight month

Affordability Concerns

Martin Totty, Chief Executive Officer of HomeLet, noted: ‘Our data has been showing, for some time, that landlords do not feel able to raise rents on new tenancies at anything like the pace seen during 2015 and the first half of 2016. Now it is even possible that rents will begin falling which would be unprecedented in recent times.’[1]

‘Landlords and letting agents have clearly recognised concerns about the affordability of rising rents and are now being cautious about what they expect tenants to pay. However, with many landlords facing increasing costs in the months ahead, as the Government begins to cut back on mortgage interest tax relief, the sector faces a difficult balancing act,’ he continued.[1]

Concluding, Totty said: ‘It remains to be seen if landlords feeling the pressure of tougher tax and regulation will be able to recoup these higher costs, as many in the industry had assumed. We see no sign of landlords panicking, and there is little prospect of an end to the long-term imbalance between supply and demand for residential property; still, with economic uncertainty adding to the unpredictability of the short-term outlook, landlords and tenants alike will be monitoring the marketplace very closely.’[1]

[1] http://www.propertyreporter.co.uk/landlords/uk-rent-inflation-falls-for-seventh-month-in-a-row.html