The pace of rental growth in the UK has more than halved since the end of March 2016, slowing consistently since the introduction of an additional 3% stamp duty on second homes a year ago.
Overall, rental growth slowed to 0.9% in March, less than half of the 2.27% recorded in the same month last year, according to the latest rental index from Landbay.
The index also shows that outside of London the pace of growth has slowed by over a quarter since the stamp duty change from 2.43% in March 2016 to 1.78% in March 2017. At the end of April 2016, the first full month of the changes, rental growth had slowed to 2.17% in the UK and to 2.40% outside of London.
The average rent paid in the UK has now reached £1,191 per month but in London it is £1,880 in London and £752 outside of the capital.
Although at a slower pace than they were a year ago, rents are continuing to rise in the rest of the UK. In London however the average rent paid fell for the eleventh consecutive month in March, falling by 0.7%, nearly four times less than the pace of rental inflation in March 2016 which was 1.96%.
Average rents in the London boroughs of Kensington and Chelsea, Westminster and Camden have seen the most significant fall in rents over the last 12 months, down by 3.65%, 2.64% and 1.49% respectively.
In contrast, rents within the boroughs of Barking and Dagenham, Havering and Bexley have grown by 2.72%, 2.7% and 2.25% as demand for properties in the outer boroughs of the city increases.
In the rest of the UK, while rents continued to rise, the speed at which they are growing slowed to 0.11% in March, the slowest monthly rate since February 2013. Rents in England, excluding London, have seen the most substantial growth over the last year, growing by 1.86%, followed by Wales up 1.41% and Scotland up 1.25%. Just Northern Ireland saw rental growth below the UK annual average of 0.9%, growing by 0.07% year on year.
‘The last 12 months have been tough for the private rented sector, a period marked by the stamp duty surcharge last April, followed by changes to mortgage interest tax relief, tighter underwriting criteria and the pending ban on letting agent fees,’ said Paul Brett, managing director of intermediaries at Landbay.
‘While the figures suggest that the government has had some success in its efforts to rebalance through the interventions outlined above, policy makers should be wary of imposing any further regulation,’ he pointed out.
‘The private rented sector is a crucial part of the housing mix and needs to be supported by landlords, tenants, housebuilders, lenders and the government alike. Playing the blame game will simply deter further investment and set the housing market off course for good. What is now needed are positive measures aimed at encouraging the development of high quality rented properties, a step change outlined in the recent Housing White Paper,’ he explained.
‘Intermediaries need to be confident in advising their clients on how to navigate what can appear from the outside a complex sector, but the flexibility and growing popularity of buy to let means the subject will become a more regular topic of conversation for brokers nationwide,’ he added.