This month the Index has also published data on the most and least affordable major UK cities in which to rent, comparing rental prices with tenants’ average income.
While rents for new tenancies in October were still higher than in the same month of 2013, HomeLet has now recorded lower rental prices in each of the past three months in many regions, indicating a cooling in the rental market.
Regions that have previously recorded high growth such as Greater London, East Anglia the South East and the South West of England are now recording falling rental prices.
In Greater London, for example, rents levied on new tenancies signed in October 2014 were 3.8 per cent lower than September 2014. In the South East, rents fell 3.1% and in East Anglia prices dropped 5.4%, while the South West saw the biggest monthly drop with rents falling by 9.3%
Meanwhile, in areas of the country where rents have not been rising quite so fast, October saw continued growth. In the North East of England, rents on new tenancies rose by 3.8% in October and in the East Midlands, October’s increase was 3.4%.
Martin Totty, Barbon Insurance Group’s Chief Executive Officer, said: “The divide between areas that previously registered fast-growing rents and those where increases were more modest suggests that the market may be levelling out geographically. All around the UK, landlords continue to make sensible decisions about the ability of tenants to pay rents.”
The recent easing in the rental sector mirrors to some extent the autumn cooling of the house purchase market, where house price increases have begun to ease in recent months. However, with house prices having previously increased sharply in most parts of the country and little sign of an improvement in credit conditions, the rentals market looks set to continue benefiting from demand from large numbers of people priced out of buying. Rents may not continue to grow at the pace seen over the past year, but the outlook remains attractive for landlords.”
City Focus
This month, HomeLet has also produced an analysis of the most and least affordable cities in which to rent by tenant income to rent ratio.
London tops the table as the most unaffordable major city in the UK, with monthly rent commanding 49% of the average tenant’s income. Edinburgh and Birmingham follow close behind with tenants paying out 47% of income towards monthly rent payments.
By contrast, Plymouth, Cardiff and Leeds offer much better value for tenants with more favourable ratios between average tenant income and rental prices.
Commenting further, Martin Totty said: “Our analysis of the affordability of renting in the UK’s major cities has produced some surprising results. In some parts of the UK, such as Scotland and East Anglia, where rental prices are now falling or stagnant, the data tells us that renting in some cities in these regions is still stretching tenant affordability. The data has also revealed some unexpected pockets of rental affordability where tenant income is keeping greater pace with rental prices.
Looking at the city data against the regional and national picture would suggest that areas that were previously very much the domain of home buyers, are becoming popular areas for renters too, as families move out of cities for a better quality of life but are unable to join the property market."
