Rate of rental growth doubles
Countrywide’s Monthly Letting Index shows how the run of eight consecutive months of falling rents in London ended abruptly in July. Rents in London ended the month 2.1% up on last year, as the number of properties available to rent in the capital fell sharply. Across Great Britain the rate of rental growth doubled from 1.1% in June to 2.2% in July. This comes as rental growth across the South of the country starts to pick up - three of the four English regions where rents rose fastest were in the South (South West, East of England and Greater London).
The number of homes on the market has remained high. That’s because of the rush to beat the 3% stamp duty surcharge for investors in April 2016 caused a spike in the number of homes to rent. A month after the introduction of the surcharge, the number of homes on the market to rent in Great Britain was 14% higher than in the previous year. By July 2017 the number of homes to rent was 4% higher and the stock of homes to rent is now falling. That’s because the change in taxation has reduced the flow of new landlords coming into the market. The effect is bigger in the more expensive parts of the country where the tax changes take a larger bite out of landlords’ yields. In July the proportion of London homes bought by a landlord fell to 10.5%, its lowest level for seven years.
There were fewer homes available to rent in July compared with a year earlier. Then there was still a spike of new properties coming on to the rental market from landlords who had bought to beat the stamp duty rise. In London there were 18% fewer available while there were falls of 6% and 5% in the East of England and the South East respectively.
Fewer homes for rent when demand is still buoyant will lead to upward pressure on rents. That’s already happening. In London rents rose in the last two months after eight previous months of falls.