Rents paid to private landlords in the UK rose by 2.5% last year, according to a new report from the Office of National Statistics (ONS) issued this month.
This means that a property which was rented for £500 a month in December 2014, would have increased to £512.40 by December.
Despite the rise in rental costs the figure is lower than in previous years with regional variations showing that Scotland has the slowest growth rate overall. England’s rental costs were up 2.7% on the previous year, with a lower increase of 0.7% in Wales and 0.9% in Scotland.
London far outstripping rental prices throughout UK
Rents in London (which grew 3.9% over the past 12 months) make up the higher figure for England where tenants have been continually forking out more for a roof over their head since January 2012. Removing London from the equation for the England percentage shows the growth rate in the rest of the country is very similar to that of Scotland and Wales.
Meanwhile, Scotland’s rental growth fell in December since it was higher in the previous quarter (ie September).
The same report showed that house price growth was stronger than rental costs growth. This is regardless of the fact tenant growth is still on the rise. In their November survey the Royal Institute of Chartered Surveyors (RICS) showed demand for rented property grew in the final three months of 2015 while the latest survey shows instructions for surveys fell towards the end of the year (but that could have simply been an unwillingness to purchase in the run-up to Christmas).
A report by the Association of Residential Letting Agents (ARLA) showed that the forthcoming changes in stamp duty this April was causing concern to buy-to-let landlords – to the extent 62% of agents predicted rents would increase after this period. A further 65% believed it would affect supply of rental properties as more landlords threaten to leave the buy-to-let market.
UK Rents expected to rise 5% by 2020
RICS members say they expect rental costs to rise by as much as 5% over the next five years. Judging by the ONS report this isn’t an unrealistic expectation since it paints a far brighter future for the UK economy that in recent years. It shows, for instance, that unemployment fell to 5.1% in the last quarter to November while pay had increased by 1.9% over the year. Exports for the UK had increased by 0.4% over the third quarter, putting the country in a stronger position within Europe and the rest of the world.
The report does add that rental prices are growing at a faster rate than wage increases, however, and with predicted rental rises post-April this could prove problematic for tenants.