Rental price inflation has slowed down again, with HomeLet’s latest data revealing that the average monthly rent in the UK now stands at £904.
What’s the latest?
The cost of letting a home is falling in real terms as rent rises fail to keep pace with inflation.
Rents increased by an average of just 0.7% in November, compared with a jump of 3.1% to the Consumer Price Index, marking the 11th consecutive month during which they have lagged the general rate of inflation.
The rise left the cost of renting a home at £904, just £6 more than in November 2016, according to the HomeLet Rental Index.
But the headline figure masked significant regional variations, with rents falling in some parts of Great Britain but rising by more than 4% in others.
Martin Totty, chief executive officer of HomeLet, said: “So far this year we have seen very modest rental price inflation; rents are now higher than a year ago in most parts of the country, but there has been no return to the more rapid increases we last saw during the first half of 2016.”
Why is this happening?
One reason rents are currently lagging inflation is likely to be the fact that inflation is higher than normal and ahead of the Bank of England’s 2% target due to the weak pound, following the UK’s decision to leave the EU.
But the weak rise in rents may also reflect the fact that affordability for tenants is becoming increasingly stretched.
It is notable that the regions in which rents fell year-on-year, are those that have the highest average rents.
Even so, the muted increase is surprising, given the higher costs landlords now face as result of tax changes, which many commentators had predicted would be passed on to tenants.
Who does it affect?
Rents in the south east were 1.9% lower in November than they had been a year earlier.
Annual falls of 0.3% and 0.2% were also recorded in the east of England and Greater London respectively.
At the other end of the scale, rents jumped by 4.4% year-on-year in the East Midlands, while rises of above 3% were seen in Northern Ireland, the south west and north east.
Despite the fall, Greater London remains the most expensive place in which to be a tenant at an average cost of £1,530 a month, followed by the south east at £976 and the east of England at £894.
Sounds interesting. What’s the background?
Landlords have been hit by rising costs following a raft of government tax changes, including a 3% stamp duty surcharge when they buy a property, a reduction in mortgage interest tax relief and an end to the ‘wear and tear’ allowance.
Despite these rising costs, rental increases are expected to remain subdued in 2018 in line with muted growth to house prices.
One reason for this is that rental affordability has become increasingly stretched following sharp increases seen in previous years when demand for rental property outstripped supply.
Top 3 takeaways
- The cost of letting a home is falling in real terms as rent rises fail to keep pace with inflation
- Rents increased by an average of just 0.7% in November, compared with a jump of 3.1% to the Consumer Price Index
- The rise left the cost of renting a home at £904, just £6 more than in November 2016
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