The average cost of renting a home in the UK is now rising for the first time in almost two years, according to Landbay.
The Landbay Rental Index has found that, on average, rents grew by 0.07% in January – an indication that sustained rental growth could occur in the UK throughout 2018.
Average rents in the UK now stand at a record £1,198 per month (an increase of 0.66% year-on-year), while rents in the capital stand at £1,876 – 2.5 times the rest of the UK (£760). This is just £16 a month shy of the £1,893 record set in May 2016.
Since that record was hit, rents in London fell every month. However, the capital has bounced back from the downward pressure on the national average, growing 0.03% in January and softening the year-on-year decline to -0.54%.
While every region saw an increase in rents last month, the speed of rental growth was not as consistent. Wales experienced the most rental growth (0.10%), with Scotland close behind (0.09%), and Northern Ireland lagging behind at 0.01%.
On a regional level, the East Midlands had rental growth of 0.18% in January alone, followed by the East of England at 0.13%. Meanwhile, rents in the North East matched the 0.03% growth seen in London.
Savills recently predicted that rents will rise by 2.5% this year, cumulating to 15.5% over the next five years. With a number of tax and regulatory changes weighing down the buy-to-let sector, the pressure on landlords could lead to higher rents for their tenants.
“Landlords who turned their backs on London when rents started to dwindle may now want to reconsider,” said John Goodall, chief executive and founder of Landbay. “An uplift in rents has been on the cards for a while, and is likely to continue into 2018.”
“Stamp duty changes pushed up transaction costs for landlords back in 2016, as have a raft of new regulations from the PRA landing in 2017. Furthermore, the Bank of England’s Term Funding Scheme comes to an end this month, pulling away one of the crutches that has allowed many mainstream lenders to keep mortgage rates so low.”
“This, together with gradually rising interest rates, will eventually push up borrowing costs for banks, and consequently for landlords, who will have to pass some of these costs into tenants in the higher form of rents.”
Goodall added: “House prices have declined in the capital for four consecutive months and, combined with positive rental growth of 0.03% in January, yields will now be climbing.”