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Monday 15 August 2016
London rental growth stalls
July’s Countrywide Lettings Index shows that rental growth slowed across every region of the country. London recorded the first annual drop in rents for six years. Rents in the capital fell 0.5% over the last 12 months making the average rent £7 per month cheaper than it was in 2015. The last time rents in the capital recorded a year-on-year fall was in November 2010, when the average monthly rent in London was £923, 39% less than today. Across Great Britain, rents rose 1.5% year-on-year, the slowest rate of growth since 2012.
While tenant demand has increased nationally, the volume of homes coming onto the rental market has slowed or in some cases reversed rental growth. In July there were 23% more homes available to rent in the UK than at the same time last year, while the capital saw a rise of a third. Some of this increase has been driven by purchases rushed through to beat the stamp duty deadline, however the number of homes available to rent has continued to rise in recent months, particularly in London and the South East.
An increase in the number of homes on the market has meant less deals are agreed above asking rents. In July 2015 16% of tenants paid over the asking rent to secure a home compared to 7% in July 2016. In London the fall was larger, 11% of homes let for more than the asking price in July, down from 32% in July 2015.
In July the average rent in the UK was £951 a month, up 1.5% on last year, but rising half as fast as in July 2015. Rents in London (-0.5%), South East (-1.1%), Wales (-2.0%) and Scotland (-1.0%) are now lower than they were in July 2015. Across the North and Midlands, the rate of rental growth hit the highest level for two years.
Commenting Johnny Morris, Director of Research at Countrywide plc said:
“The large rise in numbers of homes available to rent has certainly slowed rental growth, even with tenant numbers increasing. Stock levels were already running higher than usual due to investors bringing forward purchases in the rush to beat the stamp duty deadline in April. Added to that, uncertainty in the sales market in the run up to, and after the EU Referendum has caused more discretionary sellers to turn to the rental market.
“While rental price growth has slowed, current market dynamics are likely to accelerate the growth of renting. It seems that with more stock and demand from tenants we will see the number of households renting increase in 2016.”
The Countrywide Lettings Index has been running since 2012 and we continually seek to improve its accuracy. From June 2017 the methodology was changed to reduce the impact of seasonality and volatility in the rental market.
While the index remains a mix adjusted series, rent and rental growth figures for each month are now based on a three month rolling average rather than lets agreed in the last month. The most expensive decile of homes let has been excluded to reduce volatility and the mix has been updated to include the most recently published government stock statistics.
The Countrywide Lettings Index uses data from Great Britain's largest letting agent to track changes to the cost of renting. The index is based on the 90,000 homes let and managed by Countrywide in each year, adjusting for their location and type. It is based on achieved rather than advertised rents and the published monthly rental figures are an average of the new lets and renewals of tenancies over a rolling three month period.