Market Insight - January 2016
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Will 2016 See a More Balanced Recovery?

Focus Economy Sales Lettings Market Indicators


Change of Pace
An imbalance in supply & demand continues to push growth in the rental market.

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ARents for newly let homes continued to grow in tthe UK in 2015 albeit at a slower pace than in 2014. Average rents in the UK grew by 3.1 per cent in 2015 taking the average monthly rent to £919. Rents rose in all regions of the country with the East of England seeing the highest growth, 6.5 per cent, and the Central London market seeing the smallest with 0.5 per cent growth.

34 per cent of tenants who renewed their tenancy faced higher rents, an increase of 7 per cent from last year. However, the average rent for renewing tenancies only grew by 1.3 per cent, less than for those moving into a new home.

Greater London as a whole also saw a slowdown in its growth but rents still rose by 4.7 per cent. As rents have risen in recent years, tenants have increasingly taken advantage of cheaper areas in outer London or further afield in the commuter belt. 

As a result, the proportion of under 25s living in the rental sector in London fell by 4 per cent in 2015, the continuation of a longer term trend. As rents continue to increase and outpace earnings in the capital, the young and those in lower income brackets have found it harder to remain in the capital, particularly in central areas. Surrounding regions in the South have seen small growth in the proportion of under 25s in their market.

Falling numbers of homes available to rent and increasing demand from tenants have been the defining features of the rental market in 2015 putting upward pressure on rents. This imbalance between supply and demand has intensified competition for homes in the market. The average property is now let within 20 days of being instructed; 2 days quicker than it was in 2014.

2016 holds further complications for the sector as the government sets its sights on boosting homeownership. The additional 3 per cent stamp duty charge, stricter regulation and changes to tax relief from 2017 onwards will all take their toll on investor sentiment and impact behaviour. With stock at a premium, the smaller landlords who decide to sell up will add upward pressure to rents, although any rises will be tempered by affordability pressures.

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