HomeLet’s latest Rental Index suggests that the rental sector is set to see the sustained growth of rental values observed throughout 2019 continue into the new decade.
The average rent in the UK is now £953; this is up by 3.5% on the same time last year.
When London is excluded, the average rent in the UK is now £793, this is up by 3.9% on last year.
Average rents in London are now £1,630, up by 2.1% on last year.
All 12 regions monitored by HomeLet showed an increase in rental values between December 2018 and December 2019 – with seven of the regions showing an increase of more than 5%.
The region with the largest year-on-year increase is Wales, showing a 9.7% increase between December 2018 and December 2019.
Martin Totty,, chief executive of HomeLet, said: “It’s been an interesting year for the property market as a whole. Despite Brexit implications remaining unknown for a majority of 2019, the private rental sector has continued to conform to the basic economic principle of supply and demand and has only seen rises edging just beyond the rate of inflation until recent months. Rental price growth has been on an upward trajectory since mid-2017, driven primarily by an acceleration in the regions outside of London.
“It’s likely that there are several things contributing to the robust performance of rental prices, the first being the Tenant Fees Act introduction in June 2019. This moved the burden of some fees from tenants to landlords in the first instance, but as most commentary reported at the time, it was very likely to find its way back to tenants over time through higher rents.
“At the same time, the last year has seen more and more reasons for private landlords to potentially exit the market, such as increased taxation and regulatory burdens. There has also been a constriction in the supply of private rental stock as some landlords have indeed left the market following this and other legislation changes that have negatively impacted their yields.
“However, demand for rental properties is not showing signs of slowing down, with the Office for National Statistics reporting the number of households in the sector rising from 2.8 million in 2007 to 4.5 million in 2017, and that the age of renters has slowly increased over the same time period. The sluggish dynamics of the sales sector may have limited opportunities for those people looking to make the move from renting to home ownership, driving demand further for rental stock.
“Over the past two years, there has been a surprisingly resilient economy with record levels of employment combined with low inflation and real wage growth, meaning that the higher rents posed by landlords have still been affordable for many private tenants, especially in areas where demand is generally ahead of supply.
“Looking forwards, more potential disincentives are on the horizon for landlords with the promise of a tightening legal regime around no-fault evictions. Should these changes lead to more landlords leaving the market as tenant demand continues to grow, this imbalance would see the rate of rental inflation rise quicker than the steady growth of 2019. So, private landlords have an interesting choice to make moving into the new decade.
“Whilst a level of macroeconomic uncertainty remains, it seems unlikely that the trend of recent years is set to change any time soon. So long as the balance between supply and demand remains, it would be reasonable to predict a further period of solid rental price growth throughout 2020.”