Rental growth in England (excluding London) fell to 1.18% in the year to May 2018, the smallest annual increase in five years, according to the latest Landbay Rental Index. The average rent paid for a property in England outside of London now stands at £769, or £1,234 if you include the capital.
The last time annual rental growth in England was at this level was in April 2013, when rents increased by 1.16%. Annual rental growth peaked in November 2015 when it was at 2.63%, though this has gradually slowed each month since to return to 1.18%.
Despite the pace slowing, rents have increased by a cumulative total of 10.32% over the past five years. Rents in the East England have seen the most considerable growth during this time, growing by 14.67%, closely followed by the East Midlands where rents have increased by 12.83%. The North East has seen the smallest amount of growth, with rents rising by just 1.90% over the same period.
Meanwhile, annual rental growth in London was below zero for the 17th consecutive month. However, this has been trending back towards zero since July 2017, dropping by only -0.08% in the year to May. Rents have still risen in the capital by 6.88% over the past five years and, with 17 out of the 33 London Boroughs now in positive territory, it looks set to make a recovery to positive growth in the coming months.
Landlords have been faced with a number of challenges over the past two years, from stricter regulation, reductions to tax relief, and a significant stamp duty tax hike when buying a buy-to-let property. Some might have expected this pressure to push up rents, though low interest rates and the Bank of England’s Term Funding Scheme (TFS) have kept the cost of borrowing down and allowed landlords to shoulder some of the costs.
With a rate rise being just around the corner, and the TFS now having ended, things could be about to change. While this is unlikely to have an immediate impact, Landbay predicts that the pace of rental growth will speed up in the latter half of this year as landlords look to price in the changes that have been building up for some time. In the meantime, the slower rental growth will be something of a relief to tenants across the country.
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