Thursday 14 July 2016

Monthly Lettings Index - June 2016

Proportion of sales to landlords drops to a five-year low

  • Q2 2016 saw the lowest proportion of homes sold to landlords since 2010 following record highs seen in Q1 2016.
  • Only 8% of homes sold (exchanged) were bought by landlords in Q2 2016.  Compared to 18% in Q1 this year and 13% in Q2 2015.
  • The North East saw the largest shift in activity as the proportion of homes sold to landlords fell from record highs of 29% in Q1 2016 to 9% in Q2.
  • The number of homes available to rent has increased by 22% compared with last year.
  • Average rents in Great Britain rose to £960 in June, a 3.6% year on year increase.

The June Countrywide Lettings Index shows that in the three months after the introduction of the new stamp duty surcharge (Q2 2016), landlord purchases accounted for only 8% of all homes bought, the lowest proportion since 2010 and 5 percentage points lower than the same period last year. This comes following the surge in activity in the first quarter of the year, where landlords accounted for 18% of home buyers, the highest proportion seen since our records began in 2010, as they raced to beat the stamp duty change

The largest change in landlord activity was in the North, Midlands and Wales. In the North East, after 29% of home sold were bought by landlords in Q1, this fell to 9% in Q2. Similarly, in Wales and the East Midlands, this fell from 19% to 3% and 22% to 8% respectively.

The increased purchase activity from landlords at the start of 2016 has led to the number of homes available to rent increasing by 22% in June compared to last year. London and the South West have seen the largest growth in homes available to rent, the number rising by 33% and 55% respectively. Increasing supply, as well as affordability barriers, has reduced the rate of rental growth with most regions seeing slower growth rates throughout the year.

Overall, average rents in Great Britain rose to £960 in June, 3.6% higher than last year. This is the highest growth in the year so far, but still 0.2 percentage points slower than the rate in June last year.

Commenting, Johnny Morris, Research Director at Countrywide, said:

“The lull in landlord activity is mostly due to investors bringing forward purchases in the first three months of the year to beat the April Stamp Duty deadline.  But upcoming changes to mortgage tax relief and the prospect of heightened uncertainty in the economy during the lead up to the referendum, will also have made investors warier of entering the market.

“Those extra homes bought by landlords at the start of the year are still making their way to market.  Despite tenant numbers still growing, the increased supply is slowing rental growth.”

View charts and tables

About the Countrywide Lettings Index and new methodology

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.