UK rents for new tenancies have begun to rise at a rate not seen in the market for over two years, according to HomeLet’s latest Rental Index.
The annualised picture shows rental values having increased at a higher rate than was seen in 2018 – rising by 3.3% in the last 12 months.
The Rental Index is showing a move away from the normal fluctuations in the private rental market, with rents for new tenancies now rising at a rate above inflation – one that has not been recorded since October 2016.
The region with the largest year-on-year increase in the South West, showing a 5.8% increase between March 2018 and March 2019.
The average rent in the UK is now £942, up by 3.3% on the same time last year. When London in excluded, the average rent in the UK is now £782, this is up by 3.0% on last year. Average rents in London are now £1,613, up by 2.8% on 2018.
Eight regional ‘hotspots’ showed an increase in rents of more than the UK average over the first three months of 2019, while all 12 of the regions monitored by HomeLet showed an increase in rental values between March 2018 and March 2019.
Martin Totty, chief executive of HomeLet, said: “With the Tenant Fees Act due to take effect in England from 1 June, the acceleration we’re seeing in agreed rental values will come as no surprise to anyone.
“Whilst the aim of the Tenant Fees Act is to reduce the costs that tenants can face, landlords still need to cover the costs that are incurred when setting up a tenancy. With landlords already feeling the impact of taxation changes, the expectation is that costs will be passed back to tenants through higher rents, particularly for new tenancies.
“Landlords’ ability to increase rents will largely be determined by local market dynamics of supply and demand for property. Regional ‘hotspots’, where rents are increasing faster than the UK average over the first three months of 2019 when compared to last year include Wales, Yorkshire and Humberside, the West Midlands, the North East and West, the South East and West, as well as Greater London.”
Commenting on the outlook for 2019, Martin added: “Recently released annual results from a number of major quoted property agents point to a resilient private rented sector in contrast to a subdued sales market. With a still unclear outcome of the Brexit political impasse and the increasing prospect of a further extended delay in the UK exiting the European Union, the contrasting fortunes of the two main segments of the housing market seem likely to continue for some time.
“If demand for rental property remains strong, coupled with the lower frictional costs of moving between rental properties for tenants from 1 June, landlords may yet be able to recover the additional cost burden they will face by edging up rents. This will likely require the current high levels of employment and real wage growth being sustained. But, it could be the case both tenants and landlords get what they want – tenants are relieved of the one-time up-front burden of feed at the commencement of a new tenancy and instead landlords meet these costs and recover them over time via gradual increases to monthly rents.”