Buying frenzy ahead of 2016 stamp duty hike pushed up supply of new homes for letting by 10%, Countrywide figures show
Rents in Britain have recorded their first annual drop for six years, according to the UK’s biggest estate and lettings agency.
In February, the average rent in Britain was £921 a month, £5 lower than a year earlier, and the first annual decrease since 2011. Countrywide, which compiled the figures, said the buying frenzy ahead of the hike in stamp duty last year pushed up the supply of new homes for letting by 10%. Meanwhile tenant demand has been dropping, particularly in London, possibly related to Brexit.
Rents are falling fastest in the capital, down 4.3% over the year to an average of £1,246 a month. It means tenants are now typically paying £63 a month less to secure an apartment compared to last year.
Rents in the south-east have also dropped, by an average of 2.6%, but in other parts of the UK they are still rising. Countrywide said rents in Wales were up 5.3% over the last 12 months to an average of £636 per month, while in the east of England they rose 3.1% to £945.
In London, the supply of new homes to let is up 18%, but the number of tenants looking for properties has fallen by 3%. Tenant demand is also falling in the south-east, but in other parts of the UK it continues to rise.
Johnny Morris, research director at Countrywide, said: “Economic and housing sentiment – both in sales and rental markets – has been affected by our vote to leave the EU, in London more than anywhere else. This uncertainty causes tenants to be more cautious, meaning less likely to move and more likely to look for cheaper accommodation, eg sharing. With the private rented sector home to around three-quarters of new migrants, any future substantial shift in migration patterns would likely have a knock-on effect on rents.”
Any falls in rents will come as welcome relief to tenants after years of rises. Despite the small decrease over the past 12 months, the average rent in Britain is still £112 higher than the previous peak in 2007, even though average incomes have only edged ahead since the financial crisis.
The government’s white paper on housing last month acknowledged that England’s housing market is “broken”, with the communities secretary, Sajid Javid, telling the House of Commons that rents in many places swallow more than half of take-home pay.
Separate figures from LSL PropertyServices, which includes estate agents Your Move and Reeds Rain, paint a similar picture of a slow market in the south and much busier activity in the Midlands and north. It said annual house price growth dropped to 2.4% in February from 3.9% the month before, the 12th month in a row that the annual rate of inflation has fallen. It said London had been the most challenging market.
“Every borough [of London] has seen a reduction in transactions for the three months to the end of January, compared to a year before, and London has seen the largest drop in transactions in the country, down 22%,” LSL said. Prices in once-booming markets such as Camden, Hackney, Fulham and Richmond have all fallen over the past year said LSL, although they are currently falling fastest in Tower Hamlets, home to Canary Wharf’s skyscrapers and residential tower developments.
In contrast, it said house prices in Birmingham and Merseyside had hit a new peak. Average prices in Birmingham have hit £190,504, up 6.2% on the year. However the location with the biggest percentage price rise over the past 12 months is Merthyr Tydfil, normally a byword for property depression. Homes in the former mining town have jumped in price by 12.7% over the past year but, at an average of £120,682, are still among the cheapest in the UK. LSL added that a low volume of transactions in the area makes price reports highly volatile.
Nationally, turnover in the property market has been falling, with the number of transactions down 9% on the year. Flats had the biggest reduction in sales volumes, falling 15%.
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