Average rents grew by 3.1% over the year, taking the average monthly rent to £919pcm. Rents rose in all regions of the country with the East of England seeing the highest growth, up 6.5%, and the Central London market seeing the lowest with a 0.5% growth.
Table A: Average rent for newly let units
34% of tenants who renewed their tenancy faced higher rents, an increase of 7% from last year. However, the average rent for renewing tenancies only grew by 1.3%, less than for those moving into a new home.
Table B: Average rent for occupied units
Rental growth over 2015 was supported by increasing demand for rental homes and low stock of homes available to rent. This imbalance between supply and demand has intensified competition for homes in the market. The average property is now let within 20 days of being instructed; two days quicker than it was in 2014. The time to let has fallen across the country, but homes in the North of England and the Midlands are now let almost three days quicker.
Greater London as a whole saw a slowdown in rental growth in 2015 compared with 2014, but rents still rose by 4.7%. As rents have risen in recent years, tenants have increasingly looked to cheaper areas in Outer London. As a result the proportion of under 25s living in the rental sector in London fell by 4% in 2015, the continuation of a longer term trend. As rents continue to increase and outpace earnings in the capital, younger people and those in lower income brackets, have found it harder to remain in the capital, particularly in central areas. Surrounding regions in the South of England have seen small growth in the proportion of under 25s in their market, as Londoners look further afield for more affordable markets.
Commenting on the analysis, Johnny Morris, our research director says:
“A mix of steadily increasing demand and a lack of homes to rent supported rental growth in 2015, even though wage growth remained subdued. In the capital rising costs meant renters were more likely to move to Outer London or the commuter belt in search of more affordable places to live.
“2016 looks to be a complicated year for landlords as the government focuses its efforts on boosting homeownership. The additional 3% stamp duty charge, stricter regulation and changes to tax relief from 2017 onwards will all take their toll on investor sentiment and impact behaviour.
“With stock at a premium, the smaller landlords who decide to sell up will add upward pressure to rents, although any rises will be tempered by affordability pressures.”