The average rent across the United Kingdom has risen by 1.2% over the last year, according to the latest Countrywide Monthly Lettings Index. It’s the smallest increase for three years, with the average UK rent counted at £906 in January 2016. The rent levels are actually the highest on record at the moment, with the average rent now about 12% higher than the average rent prior to the recession.
Countrywide’s Research Director, Johnny Morris, said, ‘Nationally rents in January rose at the slowest rate since 2012, as some of the upward pressure on prices subsided and affordability limited further rises. Across most of London and the South East, the slowdown in rental growth is the first since 2010 where rents have been growing for the past six years.’
LONDON SEES HIGHEST RENT INCREASE
Unsurprisingly, the capital has seen the largest rent increases out of the entire UK. Since the pre-recession peak, rent growth in London is up 34% from an average of £966 per month in 2007 to £1,295 per month now. The growth in the capital is especially noticeable as it has far exceeded the growth rate of the average income, which has only grown by 10% over the same period. Such high demand squeezing the limited supply in London is the primary cause of this discrepancy, which doesn’t appear ready to ease up any time soon.
MOST UK RENT GROWTHS IN TUNE WITH INCOME
Despite the discord between income and rent increases in the capital, the rest of the UK’s rent growths are in line with average income increases, with the 12% increase in rent prices over the past nine years matching up with the 12% rise in average income over the same time period. In fact, some places in the UK are even paying less rent than they were nine years ago.
Areas such as Wales, the North West and North East, sees tenants paying an average of £12 less a month then they were back in 2007. However, it is predicted that these areas that currently have their average rent prices lower than they were in 2007 will see them catch-up during 2016 and overtake their 2007 level.
SUSTAINING AN AFFORDABLE RENTAL MARKET
Countrywide’s Johnny Morris believes that the most sustainable way of creating a more affordable rental market in the capital and the southern regions is by building more homes of every tenure. He continued, ‘Unlike in the US where institutional investors build homes to rent, the UK the sector is dominated by small landlords meaning the link between new homes getting built and the rental market isn’t nearly as close as it should be.’
The year ahead certainly appears to have plenty of peaks and troughs ahead for both landlords and tenants, but creating that sustainable and affordable rental market will be the key to keeping everybody happy.
