Countrywide’s Monthly Letting Index shows how the run of eight consecutive months of falling rents in London ended abruptly in July. Rents in London ended the month 2.1% up on last year, as the number of properties available to rent in the capital fell sharply. Across Great Britain the rate of rental growth doubled from 1.1% in June to 2.2% in July. This comes as rental growth across the South of the country starts to pick up – three of the four English regions where rents rose fastest were in the South (South West, East of England and Greater London).
The number of homes on the market has remained high. That’s because of the rush to beat the 3% stamp duty surcharge for investors in April 2016 caused a spike in the number of homes to rent. A month after the introduction of the surcharge, the number of homes on the market to rent in Great Britain was 14% higher than in the previous year. By July 2017 the number of homes to rent was 4% higher and the stock of homes to rent is now falling. The fall is bigger in the more expensive parts of the country due to the higher tax rates. In London (-18%), the East of England (-6%) and the South East (-5%) there were fewer homes on the market than last July.
The steady fall in the number of homes available to rent in London has been driven by a drop in the number of landlords buying since the new stamp duty rates. In July the proportion of London homes bought by a landlord fell to its lowest level for seven years. Just 10.5% of the homes sold in the capital last month were bought by a landlord, the lowest level since August 2010 (9.7%) when finance was harder to come by and half the 2015 average (20.9%).
Ultimately, fewer homes on the market should help support rents as demand for rental accommodation is still strong.