New research has revealed that average residential rents in Britain continued to rise during July, with demand still outweighing supply. However, the rate of growth is slowing.
Analysis from HomeLet reveals that with the exception of Greater London, the average monthly rent now stands at £779 per month. This is 2.3% higher than one year ago.
In the capital, rents are now £1,599 per month, a rise of 4% in the twelve month period.
Data from the report suggests that buy-to-let landlords have been able to secure higher rents on new tenancies, despite the uncertainty created by the Brexit vote in June.
This is in line with the housing market, as mortgage lenders are also reporting modest growth in house values in the month following Brexit.
Moving forwards, the private rental sector looks set to be unchanged by the result. A growing population, unaffordability of house prices and lack of new supply suggests that sector will be a vitally important component of the housing market in years to come.
A further look at the figures shows that there is a tangible regional variation recorded. Month-on-month, rents rose most in East Anglia, by 3.7%. In addition, the region came out on top for annual rises, seeing a yearly rise of 9.7%. As such, average rents in the area now stand at £897 pcm.
However, in Scotland rents dropped by 3.7% month-on-month. On a yearly basis, rents increased by 1.4% to an average of £676. The only other area to see a fall in the month was the North East, where rents fell by 0.4% to £537. Yearly, rents dropped by 5%.
Supply and demand
Martin Totty, chief executive at HomeLet’s parent company Barbon Insurance Group, believes rents will be determined by supply and demand in the sector.
Totty noted, ‘population growth will continue to increase demand and the housing stock isn’t growing quickly enough to meet that demand. However, with rents ultimately limited to a tenant’s ability to pay, rents are likely to continue to climb, albeit at the slowing pace noted most recently.’
‘We won’t know exactly how Brexit is impacting the private rental sector and it will be several months yet until we see some clearly established trends in the marketplace. It seems likely that with lenders concerned about the prospect of falling house prices, loans to value in the mortgage market are going to become less generous, which may see more people turn to the rental sector rather than buying a property. However, it’s possible we may also see renewed interest in the London rental market as foreign investors seek to pick up investment property to make the most of the big exchange rate advantage following the fall in the pound,’ he continued.’
Concluding, Totty said, ‘we may also see foreign investment increase outside the capital, in other cities across the UK. This coupled with recent figures showing that the number of people becoming homeowners is falling across the country, the demand for rental accommodation is likely to remain strong.’