UK Rents fell again in June, new data from the HomeLet Rental Index reveals, with the typical new agreed rent 0.3% lower than in June 2016. The average rent now stands at £908, down from £910 last June.
Last month’s negative rate of rental price inflation follows a slip of 0.3% in May, the first fall in eight years. Since peaking at 4.5% in June 2016, rental price inflation fell steadily, turning negative in May.
The decline has been led by London where rents in June were 2.6% lower than June 2016. London has also seen the highest peak to fall decline, with rental price inflation topping out at 6.6% last summer. However, other regions of the country are also seeing falling rents, with Yorkshire & Humberside, the South East, Scotland and the North-East all registering annual declines last month.
The market’s reversal appears to reflect nervousness amongst landlords about tenants’ ability to pay higher rents, against a backdrop of economic volatility, including rising inflation and depressed earnings growth and political uncertainty.
However, while rental price inflation has slowed considerably, the fundamental dynamics of the private rental sector are little changed over the past 12 months, with demand for property continuing to outstrip supply. Cost pressures on landlords, including curbs on the tax relief available against mortgage interest, have also continued to mount.
In that context, the June HomeLet Rental Index may offer the first evidence that the slowing in the private rental sector is now bottoming out. The 0.3% decline seen across the UK in June was identical to May’s figure, rather than a further deterioration. In London, meanwhile, the 2.6% decline was an improvement on May’s fall of 3.0%.
However, it is too early to say whether rents will now stabilise, rather than falling further, particularly given the continuing uncertainties around the outlook for the UK economy.