Landlords putting the brakes on rent rises

Modern flats

The rise in London rental prices is slowing down.

In a bit of good news for tenants and bad news for private landlords, figures from the Office for National Statistics show that rents in London are now rising slower than the average for the rest of England.

In the 12 month to the March this year rents in the capital had gone up by 1.6% compared to 2.4% across the rest of England, according to data from the ONS Index of Private Housing Rental Prices. This is in line with a trend in the year-on-year figures since November last year when London slipped behind average rise for the rest of country.

Before August 2015,  London rental prices were rising much faster than elsewhere.

rent rise march 2017

A regional breakdown of the data shows that the 1.6% rate of increase in London is the same as Yorkshire and Humberside. Rents in five other regions of the England are now climbing faster than the capital.  This includes the East and West Midlands, East of England, the South West and the South East. The increase in the South East over the period was 3.4%.

The Royal Institute of Chartered Surveyors (RICS) says that the demand for rental property across the country remains steady but the number of new landlords instructing letting agents is down for the sixth month in a row.  This may increase pressure on prices, but RICS says that London is the exception to this. In its most recent monthly survey of the residential property market  it says that rents will continue to ‘soften’ in coming months and then remain broadly static for the year ahead.

While that may be a welcome forecast for more than a quarter of Londoners who rent their homes from private landlords, the amount they pay each month is still more than double the average for the rest of the UK.

Source data

See also

What you need to know about renting in London

Families face the biggest premiums for renting homes in the capital

More “affordable” homes but the rents prove unaffordable for many

Social housing rental defies location-driven pricing of private sector

council housingLocation, location, location are often quoted as the 3 watchwords of property pricing as the area in which you choose to live has such a huge impact on the costs of buying or renting a home.

While that is true of the private market the social rental map of London offers a very different picture. Kensington and Chelsea, and Westminster are the most costly places to rent a home in the private sector. But average weekly rents for social housing are highest not in these expensive central boroughs but in Newham and Camden.

Social housing provides an affordable alternative for people who do not have the resources to buy a property or rent in the private sector. It is provided by local authorities and by Registered Social Landlords, defined as those that manage at least 1,000 homes. These can be charities or companies; most are housing associations.

Rents charged by social landlords are much lower and increases are controlled by a formula put in place by the government. Government policy for the past 15 years has been for rent convergence in social housing to ensure that similar homes in similar areas are charged at the same level. In order to achieve this it set target prices with those below the rate given some scope in the rent formula to gradually get prices up.

This more uniform approach produces a surprising rental map of London. Urbs looked at data from Registered Social Landlords gathered by the Department for Communities and Local Government. Newham and Camden emerge with the highest average price while one of the most costly areas for private rental, Kensington and Chelsea, is cheaper than Barking and Dagenham.

The data does not make clear the nature of the housing stock but tells a story of relatively level average rental pricing.

Social landlords

Using data from the Office for National Statistics in its Index of Private Property Rental Prices Urbs has previously looked at rental prices across London. The map shows a very different picture with sharp difference between monthly rental costs in central boroughs and outer areas.

Rental all prop map

In the last budget the Government revealed plans to extend the Right to Buy policy to housing association tenants, allowing them to own their rented home. While tenants who rent from Registered Social Landlords in central areas are paying similar rents to those in outer areas their properties are likely to command a much higher market value if they become part of the private housing sector.

Source data

See also

Families face the biggest premiums for renting homes in the capital

Under 40s locked out of housing market destined to be “generation rent”

Urban chic or leafy charm? Inner city rentals catch up with affluent areas

Families face the biggest premiums for renting homes in the capital

terrace on hil-2The punishing premium on private rents in the capital is more severe for families who need 2 or 3 bedrooms. Rents for 1-bedroom properties are more than double in London but for those with children as well as themselves to house, a home may cost 150% more to rent.

Urbs analysed the latest data from the Valuation Agency Office, a body that advises the government on property prices, to look at the cost of different types of rental property in London.

We looked at median prices to iron out the highs and lows that affect averages.

Median Monthly Rental
London England
Room only £525 £341
Studio £850 £500
1 Bedroom £1,155 £525
2 Bedroom £1,400 £595
3 Bedroom £1,695 £675
4+ Bedroom £2,500 £1,175

The premium paid for renting in the capital is significant for all types but highest for medium size flats and houses.

Rental private premium

The most expensive region outside of London is the commuter area of the South East. Comparing the median rate for all properties the monthly cost in the South East is £779 but nearly double that at £1,350 in London.

But London itself see distinct variations with the highest median rate for all properties in Westminster, and only 4 boroughs – Sutton, Havering, Barking and Dagenham and Bexley, where it is below £1,000

Rental all prop map

Other data from the Office for National Statistics shows private rents continuing to rise. The Index of Private Housing Rental Prices, a quarterly index that tracks the prices paid for renting from private landlords shows a 4% rise between April and June compared to the same period last year.

Over a 10-year period prices in London have risen by 35% compared to 17% for the rest of England. The 4% rent inflation is a return to the higher levels of 2013 after less steep rises in 2014.

monthly rental

The last dip in rent inflation was in 2010. Since then prices have risen steadily with rises in London at least double the rate in the rest of England.

The affordability of property means home ownership is beyond the means of many in the capital and renting in the private sector is the only option. As previously reported by Urbs, there is a growing concern than many younger people will never be able to save enough for a deposit to buy a property in the capital and they are becoming a so-called ‘generation rent’.

Index of Private Housing Rental Prices

Valuation Office Agency

See also

Paying the rent takes up 72% of income for private tenants

Under 40s locked out of housing market destined to be “generation rent”

Urban chic or leafy charm? Inner city rentals catch up with affluent areas