Rental growth is slowing – but the future looks brighter writes Fionnuala Earley.
The pace of rental growth across all of the country has been slowing since 2015, but this has been dominated by changing conditions in London market. Excluding London, rental growth only began to decelerate from 2017. The latest data shows that average rental growth of new and existing rents rose by 0.9% in the twelve months to August, unchanged on the previous month. But excluding London, rents increased by 1.5%, also unchanged from July 2018. Rents in London are falling – by 0.3% in the 12 months to August , following the same 0.3% fall in July.
Looking across the regions, the rental market is following a similar pattern to the sales market in terms of pricing. Rental growth in the London market is weakening sharply, while other regions continue to see positive rental growth. East Midlands tops the list of fastest growth in rents at 2.8% in the we months to August. The future for rents does look brighter because of the lack of homes coming to the market to rent.
The Royal Institution of Chartered Surveyors (RICS) August 2018 Residential Market Survey showed new landlord instructions are falling and have done for 23 consecutive months. Yet tenant demand remains strong as uncertainty and affordability affect the sales market too. RICS reports tenant demand at its strongest in almost two years. With this imbalance in demand and supply the likelihood is that rents will go up more quickly again soon. Results from the RICS survey suggest that this is particularly the case in the London market where the gap between tenant demand and supply is widening.