New data released by buy-to-let lender Landbay has revealed that the average rent paid for a property in Britain increased by 1.12% in 2016.
This represented a slowdown from the 2.34% in 2015, with falling rents in the capital dragging down the resilience in rental growth evident in the rest of the UK.
According to the report, the typical UK rent rose to hit a record £1,188 per month during this year, up from £1,177 at the end of 2015. These figures are inflated by London, where rents rose to a peak of £1,894 during April, before falling in every month since then to hit £1,883 by the end of November.
The negative growth in the capital (-0.31%) was different to the 2.46% increase seen in 2015. Taking London out of the equation, rents in Britain increased by 1.91% to hit £749 by the end of November.
The East Midlands (2.6%), North West (2.03%) and Yorkshire and Humberside (1.67%) have all seen rental growth rise at their quickest pace for five years.
John Goodall, CEO and co-founder of Landbay, noted: ‘When you look at the raft of regulatory, political and economic challenges coming to bear on the buy to let sector in 2016, it’s clear to see why rental growth has slowed this year, but the nation has not been equally affected. London has been something of a millstone for the rest of the UK, and tenants will no doubt be relieved that rental pressure has eased since the referendum, but the fall in rents is unlikely to last, and we expect the tide will turn in 2017.’
‘A new stamp duty levy, tighter affordability controls from the PRA, and the removal of mortgage interest tax relief all look likely to restrict the supply of rental housing in 2017, and tenants will have little choice but to compete for what properties are on offer. As a result we expect rents to rise faster than the pace of inflation next year, with growth tripling to 3% by the end of 2017,’ he continued.
Rate of UK rental growth slows during 2016
Both the HS2 and Crossrail 2 projects have been announced in recent years, with Landbay’s report uncovering tenants close to the proposed routes are already seeing rental pressures.
All key stations on the HS2 routes north of London have seen rental growth above the national average of 8.8% during the last five years. Birmingham Curzon Street (23.7%), Birmingham (22.4%) and Leeds (15.3%) have seen significant rental growth over the period.
Mr Goodall concluded by saying: ‘Infrastructural investment featured highly in the Chancellor’s Autumn Statement, and it’s clear that the government is counting on HS2 and Crossrail 2 to deliver significant economic benefits to people living in the areas they connect. This may well be so, but it will all be for naught if a shortage of housing makes the areas unattractive to live in. Rapidly rising rents may offset some additional costs for landlords, but if the situation becomes unsustainable this is not good for the housing market as a whole. Housebuilding along the route needs to be spread across all tenures, so those in the rental market aren’t squeezed out by the impacts of the sudden arrival of new transport infrastructure.’