The latest government rent index reveals a 9.2% increase in average private rents across the UK in the year leading to March 2024, slightly up from 9.0% in the previous year to February 2024. Average monthly rents also rose to £1,285 (9.1%) in England, £727 (9.0%) in Wales, and £947 (10.5%) in Scotland, with Northern Ireland at 10.1%.
Notably, London saw the highest inflation at 11.2%, while the North East experienced the lowest at 6.1% in England. These figures underscore the ongoing trend of rising rents, particularly in urban areas, posing challenges for tenants across the country.
In contrast, average UK house prices experienced a marginal decline of 0.2% over the 12 months leading to February 2024, a slight improvement from the 1.3% decrease observed in the previous 12 months ending January.
According to Jeremy Leaf, a north London agent and former RICS residential chairman, rental prices continue to rise, albeit at a slower pace, reflecting the persistent supply-demand gap. Affordability remains a primary concern, although the recent news of slower cost-of-living increases may offer some relief to tenants, especially those facing significant living expenses relative to their income. Despite challenges such as higher tax and mortgage costs, many landlords prioritize securing quality tenants over maximizing rental income.
Tom Bill, representing lettings agency Knight Frank, observes that the annual growth in rental values is approaching double digits, primarily due to a shortage of available properties and sustained demand. This scarcity has been exacerbated by factors such as increased mortgage expenses and the proliferation of regulatory requirements and taxes, prompting some landlords to exit the market. Unfortunately, there seems to be little prospect of change in the political landscape, which poses ongoing challenges for both landlords and tenants alike.
Adding to the discussion, Richard Rowntree, the managing director of mortgages at Paragon Bank, echoes these sentiments. He attributes the surge in private rental inflation to the persistent supply-demand gap prevalent across many regions of the UK. Despite a marginal decline in tenant demand from the peak levels experienced last summer, the fundamental imbalance remains, with more tenants seeking properties than those available for rent. Looking ahead, with expectations of robust population growth and household formation in the forthcoming years, it becomes imperative to expand the stock of rental properties to match the escalating demand.
In light of these observations, it becomes increasingly evident that addressing the shortage of rental properties is crucial to alleviating the pressures on both landlords and tenants. Government policies and incentives that facilitate the construction and conversion of properties into rental accommodation could play a significant role in addressing this imbalance. Additionally, measures aimed at supporting landlords, such as streamlining regulatory processes and providing tax relief, may encourage investment in the rental market, thereby contributing to a more balanced and sustainable rental sector in the long term.
Yesterday’s inflation figure, showing a decline to 3.2% annually from the previous 3.4%, reflects a shift in the trajectory of interest rate adjustments. Craig Fish, director of Lodestone Mortgages and Protection, underscores the potential influence of the energy price cap reduction in April on forthcoming data. However, amidst rising fuel costs and stagnant wage inflation, the likelihood of a rate cut in June appears to diminish, especially as SWAP rates and lender rates exhibit signs of upward movement.
Riz Malik, director of R3 Mortgages, underscores the formidable challenge of achieving the coveted 2% inflation target. Governor Andrew Bailey’s acknowledgment of divergent inflationary trends between the UK and US injects the possibility of a Bank of England rate cut preceding actions by the Federal Reserve. While the immediate impact on the property market may be muted, the anticipation of a rate adjustment in either the June or August meetings gains traction, influencing market sentiment and lending dynamics.
Sarah Coles, head of personal finance at business consultancy Hargreaves Lansdown, suggests that the recent disappointing inflation figure may prolong the wait for positive news in the housing market. According to Coles, homeowners anticipating a remortgage opportunity are eager for indications of an impending rate cut. While the inflation data indicates progress, Coles advises patience, noting ongoing inflationary pressures that warrant scrutiny.
Coles highlights the impact of rising oil prices, evident in increased petrol costs in March, and anticipates broader implications on the prices of goods affected by manufacturing, transportation, and energy consumption. Despite wage growth outpacing inflation, Coles underscores the cautious approach of the Monetary Policy Committee, indicating market expectations of a potential rate rise no sooner than August.
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