UK rental price increases shows no sign of slowing

UK rental price increases shows no sign of slowing

Latest figures from the Office for National Statistics (ONS) show that average UK rental price rose by 2.6 percent in the year to April 2016.

The increase was highest in England where rent rose 2.8 percent during the period. Scotland and Wales saw lesser increases at 0.5 and 0.2 percent respectively.

In the year up to April 2016, all the nine English regions saw an increase in private rental price.

Locally, London recorded the highest annual rental price increase at 3.7 percent, followed by the South East at 3.1 percent, and then 3.0 percent in the East of England.

The report by the ONS shows average private rental prices have been increasing steadily since January 2011. England leads the chart, recording increases of between 1.4 percent and 3 percent year on year since early 2012.

Average rents in England increased between January 2005 and February 2009, fell between July 2009 and February 2010, and have been rising since May 2010.

Statistics from the ONS show that London has seen a stronger annual price increase than the rest of England since November 2010.

In the year to April 2016, North East England recorded the lowest annual rental price increase at 0.8 percent, followed by 1.1 percent in the North West, and then Yorkshire and the Humber at 1.3 percent.

The table below gives some perspective on the UK annual rental price increase since December 2015, according to records from the ONS.


Period UK Rental Price Increase England Rental Price Increase Wales Rental Price Increase Scotland Rental Price Increase
Year to December 2015 2.5 percent 2.7 percent 0.7 percent 0.9 percent
Year to January 2016 2.6 percent 2.7 percent 0.3 percent 0.8 percent
Year to February 2016 2.6 percent 2.8 percent 0.2 percent 0.7 percent
Year to March 2016 2.6 percent 2.8 percent 0.2 percent 0.6 percent
Year to April 2016 2.6 percent 2.8 percent 0.2 percent 0.5 percent


Scotland has seen a steady decline in rental price since December 2015, which experts suggest is strongly linked to relatively high supply and low demand in rental property, compared to England and Wales. Scotland also saw a house price growth of only 0.5 percent year on year, in April 2016.

The steady increase in UK rental price over the past months has been attributed to several reasons by industry experts.

Demand vs Supply

April 2016 figures from the Royal Institution of Chartered Surveyors reveal that the demand for rental property has shown sustained growth over a 16-month period.

On the other hand, the Association of Residential Letting Agents (ARLA), revealed that although the number of property coming into the market in April rose significantly as landlords sold up their buy-to-let property to beat the April 1 stamp duty surcharge, the supply of rental property was still 5 percent lower than in April 2015.

Paul Smith, chief executive at Haart Estate Agents observes, “While the number of properties available to rent surged following a rush from buy-to-let investors in advance of the Stamp Duty changes on April 1, we are now seeing a decline in stock as investors withdraw from the market.

The new tax changes which significantly lower profit from buy-to-let, has seen many landlords pull out while intending ones have been discouraged.

Figures from the National House Building Council (NHBC), the largest warranty provider for UK new-build homes, reveal that it registered just over 36,500 new-build homes in Q1 2016, which is a decrease of about 9 percent year on year.

Bureaucratic Changes

The change in due process for getting building, especially for small and medium size property, has also significantly affected the number of property coming into the market. Stirling Ackroyd, London real estate agent, reveals that Q1 of 2016 saw a sharp decline of 64 percent year on year in the number of approvals for new home builds.

Stricter lending rules imposed by the Bank of England on mortgage lenders has also seen less investors being able to get into the buy-to-rent market. The new rules were legislated over concerns of economic risks posed by the buy-to-let market to the UK economy.

Economic Changes

Increased employment rates and decreased inflation rates have meant that more people are able to rent homes. And, the wide gulf between demand and supply means these people have found it increasingly difficult to find property for rent; Landlords raise rent with renters having little choice.

Adrian Gill, Director at Your Move and Reeds Rains, explains, “In the towns and cities with the biggest renting populations, it is a constant struggle for supply from landlords to match demand from tenants. With a surge in jobs and local economic activity, rents rise. Keeping pace will not be easy, and will depend on the freedom to invest as a landlord”.


ARLA’s Managing Director, David Cox, said that the increase in the number of homes available in the UK property market in April was merely due to the push by landlords to hands-off buy-to-let following the stamp duty surcharge. He reckons that rental property supply will decrease much further within the next six months as less people invest in buy-to-let following the tax changes.

The impact of the demand vs supply ratio is expected to get worse as more people who have been empowered by an improving economy will be unable to find property to rent.

Haart Estate Agents’ Smith further explains, “ironically, the Government’s efforts to help first-time buyers by penalising investors, could end up hindering them as a shortage of rental properties will drive up rents in the long term, making it more difficult to save up for a deposit.”

Outlook and Dealing with increased rental costs

It is still early days to know the long-term effects of the new tax laws, and some of the laws do not come into full effect until 2020. The results seen so far may be a temporary reaction to immediate causes.

Martin Totty, chief executive at Barbon Insurance Group, says “for now it’s business as usual, which may be better news for landlords than for tenants, though landlords will no doubt be feeling the squeeze too given the various taxation changes they now need to budget for.

We will have to see whether landlords try to pass their higher costs on, whether buy-to-let property investment diminishes in popularity and whether tenants are able to afford further increases in rents.”

HomeLet, UK property insurance company, reveals that new single tenancy has seen a very drastic reduction (67 percent) since 2008 while the number of new tenancies secured by pairs rose by 24 percent over the same period. New tenancy by more than two people rose by 10 percent in the same period.

The belief is that people are renting property in pairs and groups to cope with rising rental costs.

Although renting by families with children has also increased in the period, the figure is not as significant at just 7 percent.

The future does not look very bright for tenants, but they can take advantage of the UK government rules on rent increase in order to ensure that they don’t suffer unduly for the effects of the current UK property market situation.

Article Source: The House Shop