Pace of UK rental growth halves in 2016

Pace of UK rental growth halves in 2016
When you look at the raft of regulatory, political and economic challenges coming to bear on the buy to let sector in 2016, it’s clear to see why rental growth has slowed this year

New data from buy to let lender, Landbay, has found that the average rent paid for a UK property grew by 1.12% in 2016, slowing from 2.34% in same period of 2015, as falling rents in London weighed down otherwise resilient rental growth in the rest of England and UK.

According to the report, tenants along the recently announced HS2 and Crossrail 2 routes are already feeling intense rental pressure.

The National Picture

The average UK rent grew 1.12% in 2016 to hit a record £1,188 per calendar month, up from £1,177 at the turn of the year; an extra £11 per month, or £132 per year. This national average is inflated by London, where rents hit a peak of £1,894 in April, before entering negative territory in May, the month before the EU referendum, and falling in every successive month to £1,883 by the end of November.

London’s negative growth, -0.31% from January to November 2016, comes in stark contrast to the 2.46% increase seen over the same 11-month period last year. Meanwhile, rents in the UK excluding London rose 1.91% to reach £749 by the end of November. Indeed the East Midlands (2.6%), North West (2.03%), and Yorkshire and Humberside (1.67%) have all seen rents grow at the fastest pace for at least five years.


John Goodall, CEO and co-founder of Landbay said: “When you look at the raft of regulatory, political and economic challenges coming to bear on the buy to let sector in 2016, it’s clear to see why rental growth has slowed this year, but the nation has not been equally affected. London has been something of a millstone for the rest of the UK, and tenants will no doubt be relieved that rental pressure has eased since the referendum, but the fall in rents is unlikely to last, and we expect the tide will turn in 2017.
    
A new stamp duty levy, tighter affordability controls from the PRA, and the removal of mortgage interest tax relief all look likely to restrict the supply of rental housing in 2017, and tenants will have little choice but to compete for what properties are on offer. As a result we expect rents to rise faster than the pace of inflation next year, with growth tripling to 3% by the end of 2017.”

Infrastructure and the Rental Market

Two major infrastructure projects, HS2 and Crossrail 2, have had routes announced in the past five years, and Landbay’s report finds tenants close to the expected stations along both routes are already under intense rental pressure.

All of the key HS2 stations north of London have seen rental growth above the overall national average of 8.8% in the five years since the route was confirmed in January 2012. Birmingham Curzon Street (23.7%) and Birmingham (22.4%) have seen remarkable uplifts, while in Leeds (15.3%), Sheffield (15%) and Manchester (14.5%) rental growth has also outstripped the rest of the country. Only where the line connects to London at Old Oak Common and Euston, has rental growth been more subdued, at 4.8% and 1.6% respectively.

Similarly, tenants living near four of the six Crossrail 2 termini stations have seen rent increases above the national average of 8.02% since the route was announced in February 2013. Shepperton (14%), New Southgate (11.8%), Hampton Court (9.7%), and the northernmost tip in Broxbourne (a staggering 25.3%), have all seen significant rental increases, while Chessington South (7.5%) and Epsom (6.7%) have seen more measured uplifts.

John Goodall, CEO and co-founder of Landbay continued: “Infrastructural investment featured highly in the Chancellor’s Autumn Statement, and it’s clear that the government is counting on HS2 and Crossrail 2 to deliver significant economic benefits to people living in the areas they connect. This may well be so, but it will all be for naught if a shortage of housing makes the areas unattractive to live in. Rapidly rising rents may offset some additional costs for landlords, but if the situation becomes unsustainable this is not good for the housing market as a whole. Housebuilding along the route needs to be spread across all tenures, so those in the rental market aren’t squeezed out by the impacts of the sudden arrival of new transport infrastructure.”

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Tony Gimple
Tony Gimple 09 Dec 2017

Linking professionalism to limited company borrowing is a flawed concept. Despite S24 etc., limited companies are the most tax inefficient way of running a property business and leave borrowers seriously...

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Evelyn Attwood
Evelyn Attwood 01 Dec 2017

It's normal. If you plan to buy a house in one of the most beautiful spots in the country you should pay a high price.

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Evelyn Attwood
Evelyn Attwood 01 Dec 2017

I think that the situation will be the same at December.

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Scott Garnet
Scott Garnet 06 Nov 2017

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richardrawlings
richardrawlings 01 Nov 2017

What has not been mentioned here is the effect of not only higher interest payments, but also that these payments are less likely to be offsettable as a business cost due to the scaling back of mortgage...

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Kelvin Lloyd
Kelvin Lloyd 09 Oct 2017

IT is up, to the Planners. If they will only give permission for bungalows on certain (suitable) sites, they will be built.

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maggie swift
maggie swift 09 Oct 2017

It's just the beginning of the shocking rise.

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maggie swift
maggie swift 09 Oct 2017

I have recently read that the bungalows can provide social housing for elderly residents in London.

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zoe glover
zoe glover 05 Oct 2017

Update! Worst company I have ever dealt with. Undervalued a Cambridge property by over 100k, wont take on any evidence of valuation including a RICS valuation done 3 years ago for the very same value...

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Paul Edwards
Paul Edwards 27 Sep 2017

Its nonsense articles such as this that make it harder to get clients to realise just how difficult the market is out there. When you see Rightmove and there are more 'price reduced' then 'new' most days...

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Tom Allen
Tom Allen 20 Sep 2017

Absolutely agree with you!

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RyanGeo
RyanGeo 18 Sep 2017

A sharp correction would be a less dramatic expression to use. That is already underway in certain sectors in Reading where I practice as Chartered Surveyor

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