Various reports have suggested that a number of private landlords plan to sell up and quit the PRS as a consequence of recent buy-to-let tax changes, but the latest Landbay Rental Index suggests otherwise.
The P2P lender reports that the rental value of a new letting in the UK increased by just 0.24% in the first six months of 2017, which is only a third of the 0.79% growth seen during the corresponding period last year, suggesting that the supply of rental accommodation remains high, and that landlords have yet to leave the market in-force, despite the more punitive tax regime initially announced in the summer of 2015.
Although there has been growth overall, albeit marginal, London is the only region to have seen rental values decline, according to Landbay, with June marking one full year since month-on-month rental changes in the capital first entered negative territory.
Rents in London fell by an average of 0.59% in the first half of this year, and are down 1.01% in the 12 months to the end of June. This compares to growth of 0.69% across the rest of the UK in H1 2017, and 1.59% over the past year.
Nine London boroughs are still seeing rents rise, with Havering (0.73%), Waltham Forest (0.61%), Bexley (0.58%), Barking and Dagenham (0.41%), and Enfield (0.20%) experiencing the greatest uplift over the first half of 2017.
Although rental price growth remains in positive territory outside of the capital, there has been a notable deceleration in growth in many parts of Britain.
Should the overall trend continue into the second half of 2017, UK rents would begin to fall, decreasing to -0.08% over H2. Without London, trend analysis suggests rental growth would continue to flatten, slowing to 0.60% from 0.69%, while rents in the capital would continue to fall, decreasing to -1.32%.
Although overall rents are slowing, some parts of the country continue to see robust growth; tenants in the Edinburgh saw rents rise faster than anywhere else at an average of 2.19%, followed by 1.89% growth in Peterborough and a 1.86% rise in East Lothian.
John Goodall, CEO and founder of Landbay said: “While there remains a huge degree of regional variation, the overall trend has been a slowing of rents across the UK, most markedly in London, where we’ve now seen a full year of falling prices.
“Wherever they’re based, landlords have had to face a catalogue of challenges over the past two years, from stricter regulation, a reduction in tax reliefs, and a significant stamp duty tax spike when buying a buy to let property. Yet despite these disincentives, they has been little sign of them leaving the market, and even less of them passing on these costs to tenants in the form of higher rents.
“Looking ahead however, this trend is unlikely to continue. Demand for rental properties can be expected to increase as we come out of the seasonal summer slowdown, and October’s PRA changes give landlords yet another incentive to push through transactions before the new regulations kick in.
“The changes will require any landlord with more than four properties to be assessed against their full portfolio when applying for finance. There’s no avoiding the extra workload this will cause in the short term, and lenders and brokers alike should be preparing for both a rush to beat the deadline and also the extra valuations work that will need to be done on the other side. Rents may be decelerating, but brokers will need to keep their foot on the gas throughout H2 and beyond.”