Rents across the UK grew by 0.53% in 2017 but fell by 0.01% in November – the first fall in at least half a decade as a two-speed market emerged between London and much of the rest of the UK.
That was according to Landbay’s National Rent Review, which found that annual rental growth fell by 0.83% in London, weighing down otherwise resilient rental growth elsewhere (1.27%).
John Goodall, chief executive and founder of Landbay, said: “Landlords have faced up to challenge after challenge over the past two years, from stricter regulation, reductions to tax relief, and a significant stamp duty tax hike when buying a buy-to-let property.
“One would expect this pressure to push up rents, but two key factors have allowed them to shoulder these rapidly rising costs: the Bank of England’s enduring Term Funding Scheme (TFS), which has injected a significant sum of cheap capital into banks, together with record low interest rates, which have also kept borrowing costs low.
“With interest rates now rising, and the TFS coming to an end in February, we expect upward rental pressure to be just around the corner. Without a radical house building plan for purchase as well as purpose-built rental properties, rental prices are in danger of soaring over the coming decades.”
The average UK rent has now plateaued at a record £1,196 per month, up from £1,190 at the turn of year.
The slowdown in rental growth has varied across the country with substantial growth in 2017 at 2.13% in the East Midlands, 1.65% in the South West and 1.57% in East England.
The North East has also seen rents grow at a faster rate in 2017 than at any other time in the past five years (0.65%).
London rents have fallen for 18 months since rents in the capital first entered negative territory.
London continues to be the main source of the UK’s slowdown, with rents falling in 26 of the 33 London boroughs.
Rents have fallen by -0.83% year to date in 2017, compared to 1.27% growth elsewhere in the UK. Despite the narrowing gap, London rents remain, on average, 2.5 times greater than those across the rest of the UK.
Millennials renting an average-sized property outside of London, who begin their tenancy at age 21, will spend an average of £110,830 in household rental payments before buying their first property at the average first-time buyer age of 32.
For those living in the capital, where property prices and rents are significantly higher, the average household will have spent £273,210 on rent by the time they take their first step on the property ladder.
41% of millennials don’t expect to ever own a home of their own, relying instead on the private rental sector to support them into old age.
For this emerging generation of lifetime renters, the total amount they will spend on rent in their lifetime will be an average of £1.1m if living outside of London.
Goodall added: “While younger people have always been overrepresented in the private rented sector, over the last decade there has been a marked increase in the proportion of younger households relying on the buy to let market.
“The government is giving off strong signals that it is ready to tackle the supply shortages gripping the nation, while also improving standards, affordability and the institutional supply of rental properties in particular.
“This can only be good news if it becomes reality, but with so many of the issues being systemic, only time will tell if these measures will have the desired effect.”