UK rent growth has accelerated again with tenants now paying an average £1,400 a month, latest official figures reveal.
Average private rents increased by 3.8% in the year to August, according to the Office for National Statistics, up slightly from annual growth of 3.7% in July.
The figures show rental inflation continuing to outpace house price growth, which slowed to 1.4% in the year to July.
Rent increases were particularly strong across northern England, with the North East and North West recording the fastest annual growth of any English region.
NORTHERN RENT GROWTH
Rents increased by 5.8% in both the North East and North West during the 12 months to August.
At the other end of the table, the South East recorded the lowest rental inflation in England at 3%.
Across England as a whole, the average monthly private rent reached £1,459 after increasing by 4% over the year.
Wales recorded slightly stronger growth of 4.3%, taking the average monthly rent to £846.
Average rents in Scotland rose by a more modest 1.1% to £1,013.
The latest available figures for Northern Ireland show rents increasing by 1.6% in the year to June to an average £874 a month.
RENTS OUTPACE PRICES
The rental figures contrast with a continued slowdown in the sales market.
Average UK house prices increased by 1.4% in the year to July to £273,000, down from annual growth of 1.5% in June.
Average prices rose by 1.1% to £293,000 in England, 2.6% to £215,000 in Wales and 2.3% to £196,000 in Scotland.
The latest figures mean UK rents are currently increasing at more than twice the annual rate of house prices, highlighting the continuing pressure facing tenants despite much weaker rental growth than seen during the peaks of recent years.
INDUSTRY REACTION
Nathan Emerson, CEO at Propertymark, says: “Across the year, we have seen overall rental inflation generally slow down. However, that doesn’t take away from the reality of monthly rental costs continuing to rise year on year, albeit at a slower pace than previously.
“The average salary required for many people to rent a property typically sits at £42,000, which, in the current economic climate, represents a significant challenge for many.
“We remain in a situation where, on average, we are currently seeing around eight people register interest per available property across many letting agency branches, demonstrating a sizeable mismatch between supply and real-world demand.
“For many reasons, renting a property has become an ever-more-popular option across the UK, and it’s important that the sector attracts sustainable and continued investment to keep pace with growing demand.”
And he adds: “As we head into the autumn months, it’s encouraging to see strength within the housing market. Across the year, we have seen many key indicators demonstrate just how challenging it has been for would-be home movers in terms of affordability.
“Despite consumer headwinds, the market has broadly remained resilient in terms of average house prices across many regions. There are still challenges yet to overcome, and tomorrow’s base rate decision from the Bank of England will likely set the tone over the coming months regarding overall market confidence.
“In addition, we are now only a matter of weeks away from the next Budget, which may also prove significant for many who are contemplating a house sale or purchase.”
UNINTENDED CONSEQUENCES
Tom Bill, Head of UK Residential Research at Knight Frank, says: “The rental market continues to prove the law of unintended consequences, with upward pressure on rents following the introduction of the Renters Rights Act in May.
“Landlords are setting higher asking rents to reflect the greater risks they face in relation to void periods and rent collection. That is happening against the backdrop of falling supply as a series of tax and legislative changes in recent years have undermined the viability of letting property for landlords.
“[In sales] House prices are essentially flat as higher mortgage costs have taken their toll on demand since the Middle East began in February.
“Even though the second-round inflationary effects from the war have so far been limited, renewed fears about higher energy prices have nudged mortgage rates higher in recent weeks. We expect continued downward pressure on prices, particularly if pre-Budget speculation about tax rises intensifies, which feels likely as government borrowing costs also increase.”
ENCOURAGING SIGNS
Iain McKenzie, CEO of The Guild of Property Professionals, says: “While the pace of house price growth has eased, the fact that prices continue to edge upwards is significant given the pressures households are facing.”
“As we move into autumn, the key question is whether the usual seasonal uplift in activity can gather momentum while mortgage rates remain high and inflation being pushed higher by fuel and energy costs.
“The housing market is having to operate against a much more volatile economic backdrop than we would normally expect at this time of year.
“There are some encouraging signs. Consumer confidence has improved and we are seeing renewed buyer interest as people return from the summer and revisit moving plans. Political reassurance around property taxation also appears to have helped sentiment, although it is far too early to say whether the improvement in demand will prove lasting.
“Ultimately, affordability remains the defining factor. Buyers are still active, but they are more cautious and much more sensitive to the cost of borrowing. That means we should expect an autumn market where good-quality, realistically priced homes attract attention, while properties that stretch buyers’ budgets may take longer to sell.
“The market isn’t standing still, but neither is it operating in normal conditions. A resilient autumn is possible, but activity is likely to be measured rather than spectacular.”
BUYERS CHOICE
Nick Leeming, Chairman of national estate agency Jackson-Stops, says: “The figures point to a market where realistic pricing increasingly determines which homes sell and those that stall.
“Across our network, we are seeing a number of properties coming to market with us when they have struggled to secure a buyer with other agents. In many of these cases, getting the price right for current market conditions is proving key to generating renewed interest and ultimately achieving a sale.
“Buyers are still there, but they are informed, selective and have more choice. That means sellers cannot rely on testing the market at an ambitious price and expecting buyers to follow. Homes that are well presented and realistically priced are attracting attention, while those that start too far ahead of buyer expectations risk losing momentum during the crucial first weeks of marketing.
“This is not a market without demand, but it is one in which price and strategy matter considerably. With borrowing costs and the wider cost of moving continuing to shape affordability, sellers who are serious about moving need to respond to the market ahead of them rather than the market of a year or two ago.”
MATCHING EXPECTATIONS
Nicky Stevenson, Managing Director of Fine & Country, says: “Behind the latest HPI figures is a market where buyers have more choice and remain highly conscious of affordability.
“That makes pricing more important than ever as we head into autumn. Traditionally, September and October bring a renewed wave of activity as people return to routine and pick up moving plans that were put on hold over the summer. But this year, sellers cannot assume that increased autumn demand will automatically translate into a sale.
“Mortgage costs, household bills and wider economic uncertainty are all influencing what buyers can and are prepared to pay. At the same time, competition between sellers is intense. With a significant proportion of properties remaining on the market without a price reduction, there is a clear message for anyone considering a move: getting the asking price right at launch is critical.
“Overpricing can be particularly costly in the current market. A property that misses the initial window of buyer interest can quickly become stale, and sellers may ultimately have to reduce the price after losing valuable time.
“The encouraging news is that buyers are still there. The challenge is matching their expectations with realistic pricing. For sellers, autumn should be approached with a clear understanding of local market conditions, strong presentation and, above all, a price that reflects where the market actually is rather than where they would like it to be.”
NO LANDLORD REPLACEMENT
Jeremy Leaf, north London estate agent and a former RICS residential chairman, says: “Recent data confirming a weakening jobs market, rising inflation and the impact on mortgage costs – irrespective of the Bank of England’s imminent interest rate decision – will only add further nervousness to an already price-sensitive market.
“These figures provide the most comprehensive house price snapshot as they include approximately 40 per cent of cash as well as mortgaged transactions but are a little dated and confirm the slowdown is continuing.
“Although we are not seeing much evidence of a ‘Burnham Bounce’, we have registered more proceedable buyers lately who are aware they are in the driving seat so are taking their time to identify best opportunities before negotiating hard.
“The principal problem in the lettings market is the failure to replace the significant number of landlords selling up, mainly due to the increasing number of recently-introduced tax and regulatory measures.
“As a result, we are unable to satisfy demand for larger flats and houses in particular, which is adding to upwards pressure on rents and an inevitable lowering in standards. In this climate, some landlords feel less pressure to improve properties especially as tenants can now give just two months’ notice under the Renters’ Rights Act.”
