London rents rebound as UK rental growth doubles
- Published: Tuesday 15 August, 2017
- Category: Rental market
- By: Andrew Pelis
- Updated: Thursday 24 August, 2017
Overall, UK residential rents rose between June and July, as London saw rental growth for the first time in nine months.
Countrywide’s monthly index indicated an increase of 2.2% in rental growth nationally for the period, with London leading the way.
The data shows a fall of 18% in the number of properties available to rent in the capital, purported to be a key factor in the latest results, as rental rates rose in the face of growing demand for rental properties.
The significant fall in the number of available homes to rent in London has not been matched by demand from tenants, which has gone up - by 1% on the same period in 2016.
This means that roughly the same number of people as last year are applying to rent a currently dwindling number of homes.
One of the most significant mitigating factors is that there are now far fewer landlords buying property and this is resulting in fewer homes becoming available to let in London.
July’s figures indicate that the number of homes bought by landlords in London has plummeted to a seven-year low, with only 10.5% of the homes sold being purchased by a landlord, the lowest level since August 2010 and less than half the 2015 average figure of 20.9%.
The key reason cited for this fall is the 3% stamp duty surcharge, which was introduced in April 2016. It appears now that there is an industry backlash to the additional cost that this has imposed upon landlords looking to buy property, with a 50% drop in the number of property sales in London since 2015.
However, it is not just in London where the effects of additional house purchasing charges are being felt.
As with London, there is an overall shortfall in stock in the East (6%) and South of England (5%), in contrast to the rest of the country, where the number of properties available to rent increased by 4% year on year, indicating growth, albeit at a continued slower pace, which has been consistent over the past ten months.
The shortfall in property in the South has driven rental increases in these areas, with three of the four fastest-growing regions being the South West, East of England and Greater London. Elsewhere, Scotland achieved the fastest-rental rise at 3%.
The reduction in the number of properties available to rent in the South, points clearly to a fall in the number of landlords buying additional property in this region since stamp duty levy.
Johnny Morris, research director at Countrywide, commented:
The rush to beat higher stamp duty rates in April 2016 caused a spike in the number of homes to rent, but that has now worked its way through the market. The stock of homes to rent is now falling in the more expensive parts of the country because higher tax rates have dissuaded large numbers of landlords from buying. Ultimately this means fewer homes on the market and higher rents.
Andrew Turner, chief executive at Commercial Trust, said:
There is a very evident link between the fall in the number of buy-to-let landlords buying property in traditionally expensive areas and the impact that stamp duty is having on such transactions.
“The losers are the tenants, as the consequence of fewer available rental properties is greater competition and an increase in rent.
“However, what this data does show is that despite the increase in rental prices, the demand for rental housing in London and the rest of the UK remains consistent and that has to be an encouraging sign for buy-to-let landlords.
“This demand will continue to bolster the buy-to-let market, but regardless, renting will always be a positive choice for many and a much need stepping stone, prior to joining the property ladder, for others.
This information should not be interpreted as financial advice. Mortgage and loan rates are subject to change.