Rents in the UK rose by an average of just 0.7% in January, compared to the same month of 2016, the latest data from the HomeLet Rental Index reveals. This is down from an annual rate of inflation of 1.7% in December.
The decline means that UK rental price inflation has now dropped in each of the past seven months. At the peak of the market in June 2016, rents were increasing at an annual rate of 4.7%.
The data suggests that, at the current rate of growth, we could see average UK rents begin to fall over next few months.
Across the UK as a whole, the average rent for a new tenancy commencing in January was £888 per month, compared to £882 in January 2016.
The slowdown in rental price inflation has been most marked in areas that previously saw the largest increases. 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 now 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%.
The latest falls in rental price inflation are also likely to mean that rents are now rising at a slower pace than inflation generally. With rental price inflation also lagging average pay growth, this represents good news for tenants concerned about affordability in the private rental sector.
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.
“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.
“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.”