Average UK rental prices performed strongly in 2015 despite a small seasonal dip in December, according to the monthly Landbay Rental Index.
Average monthly rents ended 2015 with a slight seasonal dip of -0.2% from £1,289 in November 2015 to £1,286 in December 2015. The December data means that average rents for the UK in 2015 were £1,280, up 3.8% on 2014.
The latest data means that rents in the UK grew twice as fast as wages, which climbed 1.9% in 2015.
Landbay said the acceleration of rents ahead of pay suggests that large parts of the UK are suffering from a shortage of properties to rent. For example, in the East of England, stagnant wage growth of 0.1% combined with rapid rent rises meant that rental growth outpaced wage growth by over five percentage points. The North East and North West were the only regions to see wages outpace rental increases.
Compared to 2014, three bedroom properties have seen the biggest increase in the average rental price, up 5.2% to £1,484 in 2015 suggesting that family homes and properties for sharers are in highest demand.
Commuter hotspots surrounding London were amongst the country’s top risers in rental prices. Luton (11.1%), Medway (8.8%) and Thurrock (7.3%) feature in the top five for rent price increases during 2015 when comparing rents from December 2014 to December 2015, a sign that many working in the capital are priced out from living there. With counties to the North, East and South of London all showing higher than average increases in rent prices during 2015, an evident ripple effect is appearing in southern parts of England, the firm said.
John Goodall, co-founder and CEO of Landbay, said: “Despite a small seasonal dip towards the end of the year, rents rose significantly ahead of wages in 2015. Rents often track wages as consumers with more pay compete for the most desirable rental properties, but the fact that rents are outpacing wages is a clear sign of the shortage in properties to rent as large parts of the UK face an acute housing shortage. This trend is clear in London and the South East, along with large parts of the East Midlands and East Anglia, and it is most evident for three bedroom properties.
“Based on its recent policy changes for the private rental sector such as the new stamp duty surcharge and changes to tax relief on mortgage interest, the Government seems intent on weeding out amateurs from the ranks of new buy-to-let investors. If it is successful, our rental index suggests that the result is likely to be higher rental income for the professional investors who are not impacted by the changes.
“As a peer-to-peer lender to the residential property sector, we enable any investor to benefit from a solid, dependable rate of return that is underpinned by UK bricks and mortar and the growing rental income it generates by lending to professional property investors.”
