Rental growth accelerates in 2017

  • Rental growth rises by a third from 1.8% in 2016 to 2.4% in 2017
  • London goes from having the slowest rate of rental growth in England to the fastest
  • Proportion of homes bought by a landlord drops to 12.5%, a nine year low
  • Number of homes on the rental market in 2017 was 4% lower than in 2016

Rental growth across Great Britain picked up in 2017.  Last year rents rose by an average of 2.4%, an increase from 1.8% in 2016 (table 1).  The average rent ended the year at £960 per month, up by £23 a month from the start of the year (table 1).  While rents rose a third faster than they did in 2016, rental growth was still behind than in both 2015 (3.2%) and 2014 (4.9%).  Forty-six per cent of landlords increased the rent when re-letting their home, up from 37% in 2016.

In a reversal of 2016 when London had the slowest rate of rental growth in England, last year it had the fastest (table 2).  Over the course of 2017 rents in London rose 3.2% (table 1), reversing the 0.8% fall recorded in 2016.  Scotland (3.3%) was the only region in Great Britain where rental growth outstripped the capital.  2017 also saw Yorkshire and Humber replace Wales as the sixth most expensive region of Great Britain to rent a home.

Last year also saw a drop in the number of homes bought by Landlords.  In 2017 landlords bought 12.5% of homes sold (table 3) in Great Britain, down from 14.7% in 2016, 16.3% in 2015.  This represents a nine year low.  Between 2016 and 2017 the proportion of homes sold to landlords fell in every region, nowhere more so than in London.  This means in the capital 5,400 fewer homes were bought by a landlord in 2017 than in 2016.

The falling number of landlord purchases has meant the number of homes on the rental market has dropped.  In December 2017 there were 4% fewer homes to rent across Great Britain than in December 2016, with London recording a 21% fall, the largest of any region (table 4).  Despite the stamp duty hike induced fall in stock, there were 5% more homes available to rent than there were two years ago.  However in London the number of homes on the market has dropped by a third.

 

 

Commenting Johnny Morris, Research Director at Countrywide, said:

“Last year saw the rate of rental growth pick up to get closer to its long-term average.  Most of the rise comes from a pickup in rental growth in London, after falls in 2016.  Rents rose across every region of Great Britain last year, although the north of England saw rents rise at a slower rate than they did in 2016.

“Rental growth has been supported by a fall in the number of homes on the rental market, with the biggest fall in London.  It looks like increased competition between tenants for rental homes will drive faster rental growth in 2018.”

 

Table 1 – Cost of a new let

Dec-17 Dec-16 YoY
Greater London  £1,706  £1,654 3.2%
South East  £1,040  £1,020 1.9%
South West  £795  £773 2.8%
East of England  £922  £914 0.9%
Midlands  £673  £656 2.7%
North  £625  £613 2.0%
Wales  £646  £641 0.6%
Scotland  £640  £619 3.3%
Great Britain  £960  £937 2.4%
Great Britain (Ex London)  £768  £753 2.0%

Source: Countrywide

 

Table 2 – Regions ranked by rental growth

2014 2015 2016 2017
Fastest growth

 

 

 

 

 

 

Slowest growth

Greater London East of England East of England Scotland
East of England South West North West Greater London
South East East Midlands Yorkshire & Humber West Midlands
North East Scotland North East Yorkshire & Humber
South West West Midlands South East South West
Scotland South East East Midlands East Midlands
East Midlands Greater London South West South East
Wales North West Wales North West
West Midlands Yorkshire & Humber West Midlands East of England
North West Wales Scotland Wales
Yorkshire & Humber North East Greater London North East

Source: Countrywide

 

Table 3 – Proportion of homes bought by a landlord in 2017

North East 21.2%
West Midlands 15.5%
North West 15.3%
Yorkshire & Humber 13.6%
London 13.2%
East Midlands 12.6%
South West 11.1%
South East 10.9%
East of England 10.4%
Wales 10.4%
Scotland 8.3%
Great Britain 12.5%

Source: Countrywide

 

Table 4 – Year-on-year change in the number of homes on the rental market

Wales 13%
West Midlands 12%
North East England 6%
South East England 5%
North West England -2%
East Midlands -3%
Yorkshire & Humber -5%
South West England -6%
Scotland -7%
East of England -15%
London -21%
Great Britain -4%

Source: Countrywide