It’s tenants market as rent growth slows 1.6% in London

For investors in buy-to-let market in London, this may not be the best of time as the latest index data shows that rental growth in this part of UK has slowed with an annual growth of 1.6 percent compared to 3.1 percent year-on-year in the rest of the country.

The property market in the UK has had to contend with two unfavourable factors this year with the introduction of 3 percent stamp duty on additional homes in April and the Brexit vote in June.

The index from HomeLet notes that the situation in the country’s rental market means that the gap between rent rises in London and the rest of the country is at its narrowest for 10 months and running at barely over half the rate in the rest of the UK.

Propertywire, an online property platform reports that annual rental growth has now slowed in London for five months in a row and while London landlords are still seeing rent increases in cash terms, as rents in the capital are significantly higher than anywhere else, the HomeLet report suggests that they clearly feel unable to raise prices at the rates seen during the first half of the year.

Across the UK, rents rose by an annual average of 3.1 percent but fell by 0.4 percent month-on-month to an average of £898. In London, they fell by 1.3 percent month on month to £1,521. Excluding London, rents increased 3.4 percent year-on-year and were flat month-on-month.

In Northern Ireland and Scotland the market has been more robust with average rents up 4.8 percent and 4.4 percent year-on-year respectively to £592 and £610. Rents also increased by 0.7 percent in Scotland month-on-month but fell 0.1 percent in Northern Ireland.

Wales has also seen reasonable annual rental growth at 2.4 percent but rents fell by 0.8 percent month on month to an average of £604 and the only other place to see rents rise month on month was the North West with an increase of 0.2 percent in November to take the average to £678.

Martin Totty, HomeLet’s chief executive officer, pointed out that rental growth has been slowing for a number of months. He believes it suggests that landlords understand that tenants have, or are, reaching an affordability ceiling, particularly given the uncertain economic climate.

HomeLet data shows that in the first half of the year, rents across the UK consistently rose at rates above 4 percent with the London market recording a peak of 6.2 percent in March but since the summer months, rental price inflation has slowed considerably.

He also pointed out that it is currently a time of unprecedented change in the rental market. A new 3 percent stamp duty charge was introduced on additional homes meaning buy-to-let landlords extending their portfolios now pay more in property tax.

Landlords have also had to cope with new checks on the immigration status of new tenants and now face tougher lending rules in 2017 as well as changes to tax relief on their buy-to-let mortgage payments and potentially increased costs if letting agents who are to be banned from charging tenants fees pass this on to landlords.

‘It is difficult to think of a period when there have been so many external interventions in the private rental sector. The impact of many of the changes are yet to be worked through and it’s unclear yet who will emerge as the winners and the losers,’ Totty added.