Rental Price Growth set to Triple in 2017
It'll be business as usual in 2017, with rental price growth predicted to rise from 1.1 percent in 2016, to as much as 3 percent over the course of the next year.
2016 bucked the rental price growth trends we have seen in recent years, with the cost of rents across the UK rising by just 1.1 percent over the course of the year - less than the rate of inflation. However, it looks like it'll be business as usual in 2017, with rents predicted to increase by up to 3 percent.
The surge in rental prices is expected to be the result of the numerous buy-to-let charges that have been introduced in the last couple of years. This includes the 3 percent stamp duty surcharge on second homes, the removal of mortgage interest tax relief and the abolition of the automatic 10 percent wear and tear allowance.
To keep their property investments in the black, landlords are expected to pass these costs on to their tenants in the form of increased rents, leading to a rate of rental price growth that is nearly three times the current rate of inflation.
Rental price rises in 2016
Rents across the UK rose by 1.12 percent to November 2016, slowing from 2.34 percent to the same point in 2015. This is how rental prices rose and fell in 2016 by region, along with the average rental cost per month:
â— East England - £891.16 per month, up 2.85 percent
â— East Midlands - £608.80 per month, up 2.6 percent
â— West Midlands - £671.63 per month, up 2.31 percent
â— South West - £732.93 per month, up 2.16 percent
â— North West - £611 per month, up 2.03 percent
â— South East - £1,041.51 per month, up 1.9 percent
â— Yorkshire and Humberside - £567.61, up 1.67 percent
â— Scotland - £719.86, up 1.25 percent
â— Wales - £632.60, up 1.22 percent
â— Northern Ireland - £559.80, up 0.84 percent
â— North East - £549.57, down 0.03 percent
â— London - £1,883.43, down 0.312 percent
In London, rents shrank by 0.31 percent in 2016, but the extremely high average monthly rent in London of £1,893 still pushed average rents across the UK to a record high. The average rent paid by tenants to private landlords was £1,188 per calendar month, which is up £11 per month and £132 over the year.
This benign environment will not last
Unfortunately for renters, the experts share the view that this favourable environment will not last. The chief executive of the property investment portal that compiled this research, said: "When you look at the raft of regulatory, political and economic challenges coming to bear on the buy-to-let sector in 2016, it's clear to see why rental growth has slowed this year, but the fall in rents is unlikely to last. We expect the tide to turn in 2017."
Part of the reason rental price growth slowed in 2016 was due to the spike in buy-to-let house purchases in March, with investors rushing to beat the stamp duty rises in April. This led to a surge in the number of properties released onto the rental market over the summer months. The result was an increase in the amount of choice tenants had and a subsequent but temporary fall in rental price rises.
However, the tighter mortgage controls introduced by the Bank of England, along with the removal of mortgage interest tax relief on buy-to-lets, will put more pressure on the finances of landlords. These changes are likely to restrict the supply of rental housing in 2017, leading to rental price rises that outstrip inflation.
Take advantage of rising rents
With house prices stalling and rental prices on the up, now could be a good time to make a buy-to-let property investment. If you would like to discuss your options in the local area, please get in touch with the team at Martin & Co. Camberley today.
t: 01276 691510