RENTS across the UK rose by an annual average of 3 per cent in October as landlords juggle affordability for tenants with their own returns.
A tenant signing up for a new tenancy during October agreed to pay an average monthly rent of £902, 3 per cent above October 2015’s average of £875 according the latest HomeLet Rental Index.
As recently as March this year, rents were rising at an average annual rate of 4.5 per cent.
The contraction in rental price inflation is most marked in areas of the country where rents were previously rising most quickly. HomeLet found. In Greater London, rents on new tenancies rose by 2.5 per cent over the year to October, having been increasing at a rate of more than 7 per cent a year ago. In the broader South-East region, rents rose at 2.7 per cent on an annualised basis last month, down from above 4.3 per cent this time last year.
Martin Totty, HomeLet’s CEO, said: “Landlords are aware of the need to find a balance between what tenants can afford and the returns they require on their investment. While many landlords are facing higher costs themselves, including the impact of higher stamp duty on their property purchases since April, our data suggests that they have so far been cautious against a more uncertain economic environment.
“We know wage growth has lagged rental price inflation and it could be that we are approaching an affordability ceiling whereby landlords can't attract tenants able to afford higher rents.”
Even in those areas of the country where annual rental price inflation is at its highest, rents fell back in October. Both the West Midlands, where rents were 5.1 per cent higher than in October 2015, and the North West, where rents were 4.4 per cent up, saw small falls compared to September.
HomeLet believes that landlords and tenants alike will need to monitor the market closely in the coming months.