According to the latest Rental Index data released by landlord insurance provider, HomeLet, rental values in the UK rose by an average of 2.1% last month (September). This rise in rental values follows the trend seen in recent months following a period over the summer in which rental price inflation was fairly low or even negative in some parts of the country.
Rise in rents across the country
The average monthly rental agreed on a new tenancy last month was £927 according to the latest figures, compared to £908 in the same month of last year.
Higher rental values were recorded in almost every region of the UK last month, with only the South East of England recording a negative rate of annual rental price inflation. Northern Ireland on the other hand experienced inflation of 4.3% last month — the highest recorded inflation rate recorded in that period.
Why have rental values risen?
Inflation in rental values before the Summer was higher than we are experiencing now. But after the Brexit vote in June, foreign investors and landlords were temporarily scared of the ramifications. This fear has now subsided and rental values have recovered, showing a steady growth in the past few months.
Landlords have also been hit with a rise in taxes which has prompted them to bump prices up to cover mounting costs. The increase in stamp duty brought in last year as well as other rising costs has made it increasingly difficult for landlords to make a profit. The only way landlords can hit their bottom line is by increasing the rent they charge tenants.
Commenting on the rise in rental values, HomeLet CEO Martin Totty said: “It wouldn’t be surprising if landlords, seeing their own current and anticipated cost increases, seek to pass these costs on to tenants to preserve the returns from capital they have invested in residential property assets.”
He adds: “This may prove to be the start of that upward movement, especially if tenants are left competing for fewer rental properties because some landlords decide the returns from property investment are being eroded by factors beyond their control.”
What does this mean for tenants?
With rental values on the rise, it’s not looking good for tenants. It’s expected that rental values will continue to rise across the country, most notably in the capital where inflation is highest. The average rental value for a property in London now stands at £1,609.
Compounded by the fact that millions of young people can’t afford to buy a property, the demand for rental properties will remain high, as will inflation.