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First Drop in Rents Reported for Eight Years

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Average rental prices dropped by 0.3 per cent in May 2017 which constitutes the first negative growth since December 2009.

Average rental prices dropped by 0.3 per cent in May 2017 which constitutes the first negative growth since December 2009. This is a small but significant fall in the prices that landlords are charging their tenants and is a twelve month comparison snapshot of the market which is judged against the corresponding figure for the same month a year ago. Taken as a country, the average rent tenants can expect to pay for all types of residential property now stands at £901 per calendar month. 

For landlords operating in Portsmouth and the rest of the South East region, it is important to note that rents incomes in the capital – often seen as a driver for the buy to let economy – diminished by 3.0 per cent in May, a much greater drop than the national average. When compared to May 2016, the latest figures indicate the most substantial drop in rents for eight years in London.

The data was put together by HomeLet in their regular Rental Index. May's figures show that rental prices dropped in five out of the dozen regions that the country is split up into. For many who follow the letting agent industry carefully, the drop in rents will probably come as no surprise. This is because the pace of growth in rental prices has already been shown to have slowed over the course of the final two quarters 2016-17. Seen across the UK in recent months, this slowdown follows a high in rental inflation which peaked at an average of 4.7 per cent last summer, according to the Rental Index.

Along with the drop in rental prices being charged for new tenancies in the capital, four other regions saw a decline over the course of May in their average rents. Three of these - the North East of England, Yorkshire and Humberside and Scotland - all saw negative growth. Outside of the capital, landlords in the North East registered the greatest drops at an average of 2.5 per cent. Nevertheless, landlords in Fareham and Southsea will also want to take note that rental prices in the south-eastern region of the UK, excluding London, also saw a significant fall. In this area, a drop of 1.5 per cent was recorded by the Rental Index.

According to the data collected by HomeLet, an insurance company that services the needs of both tenants and landlords, the slowdown that has been detected in the rental sector is something of a mirror image of what has been happening in the owner-occupier mortgage. The organisation stresses that a similar picture has already been shown in the UK's housing market, with the likes of the Nationwide Building Society putting out data earlier this month that reveals house prices have fallen in many regions of the country. Indeed, they say that this has been the pattern for each of the past three months.

HomeLet's index shows the slowdown in the capital's rental market as being the most marked, but perhaps this reflects the very high prices which London's landlords have been able to achieve in recent years. According to the research, average rents in the capital fell from £1,572 per calendar month in July 2016 to £1,502 per calendar month in May 2017. Although such a drop may seem modest, last month’s 3 per cent year-on-year comparative fall was the steepest decline seen in London since 2009 and many will be keenly awaiting June's figures in order to work out if this is something of a blip, a market adjustment or an ongoing trend.

Martin Totty, HomeLet’s Chief Executive Officer, commented on his company's research by saying that May 2017 saw average rents fall for the first time in eight years across the country as a whole. This, he suggested, compared to a period when the UK's economy had recently suffered the tumult of the global financial crisis. “HomeLet's Rental Index data demonstrates that landlords are now looking at a difficult balancing act,” he said, “between making sure that rents are affordable for tenants in a period of low real wage growth whilst being able to cover their own rising costs.”

He went on to say that tenants will require a vibrant and growing rented sector to offer them a range property options. “However, any constraint to the supply of rental properties... cannot be in the long term best interests of tenants,” he added.