New research carried out by Rightmove has revealed that national average asking rents (excluding London) increased by only 0.7% in 2017.
This is a much more muted rise than the annual increases recorded in 2015 (+3.7%) and 2016 (+3.0%).
While the pace of annual rent rises on a national basis is now at its lowest since 2014, the situation in London is improving again. The asking rents of new rental properties in London are on the up once more, with the first rise in the annual rate of growth since the beginning of 2016.
This recent uplift follows a few years of the market readjusting downwards from the high annual rise of 8% seen in 2014.
The fall in rents were also propelled by the swell in rental supply in March 2016 as landlords rushed to purchase properties ahead of the introduction of the additional stamp duty charge on second homes. With supply now tightening again, prices have started to rise.
It is now the South East that appears to be mirroring the downward trend seen in London, with the region ending 2017 down by 0.7% on 2016. This overall regional trend, though, disguises the strong performance of key commuter hubs in this area, with Farnham in Surrey claiming top spot for rental price growth in 2017, rising by 9% on the year before.
Corby in Northamptonshire experienced the next highest growth, up 8.2% on 2016. Yorkshire and the Humber, meanwhile, was the only other region to end 2017 with asking rents down, while the North East witnessed rents increasing at the highest rate, up 3.3% on 2016.
“Nationally rents have been holding pretty steady over 2017, retaining the 3% plus rises seen in both 2015 and 2016, and adding a more modest 0.7% in the last twelve months,” Miles Shipside, Rightmove director and housing market analyst, said.
“Increasingly stretched tenant affordability, and the surge of buy-to-let property supply beating the stamp duty tax hike deadline, have acted together to mute landlord pricing power,” he added. “In contrast, after a few years of falling rents in London they’re back on the up again, due to a combination of tightening stock available to rent and strong demand.”
The 2017/18 tax year will see the start of the government’s changes to mortgage interest tax relief for buy-to-let mortgages, but Shipside doesn’t believe the first phase will have a big impact on the portfolio decisions of many landlords until another year down the line.
“From speaking to some landlords they’re unlikely to make any decisions to sell up until they see in real-time how much of an impact it has on their finances, with many choosing to take a wait and see view rather than looking at short-term gains or losses,” he said. “However, agents report that there are some highly-geared landlords with large loans looking to reduce their exposure to loss of tax relief by cashing in and selling some properties.”