Rental growth starts to stutter
Average UK rents rose by just 0.7% in January, compared to the same month of 2016, according to the latest HomeLet Rental Index.
This is a drop from an annual rate of inflation of 1.7% in December.
The average rent for a new tenancy starting in January was £888 per month, compared to £882 in January 2016.
Seven months of falls
UK rental price inflation has now fallen for seven months in a row, said HomeLet, from a high point in June 2016, when rents were increasing at an annual rate of 4.7%.
The landlord insurance provider suggests that, if the current growth trend continues, average UK rents could start to fall within months.
A clear North/South divide is emerging, with rental inflation in London and the South East , which saw the strongest growth in the first half of 2016, now undergoing the sharpest downturn as tenants reach an affordability ceiling. While observers had speculated that landlords might pass on the added costs to them generated by recent changes to Stamp Duty, the abolition of the wear and tear allowance and the looming tax changes, in reality rents in the Capital and parts of the South were already so high that passing on of cost does not seem to be happening.
In Greater London, annual rental price inflation was just 0.4% in January, compared to a peak of 7.1% last July.
In the South East, annual rental price inflation is already negative, with rents on new tenancies agreed in January down by 0.6% compared to January 2016. As recently as last June, rents in the region were rising at a rate of 4.0%.
Martin Totty, HomeLet’s chief executive officer, said: “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.”