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Rents could fall as landlords in London saw healthy monthly rises shudder to the most significant drop in more than three years. This rent digest looks at various statistical sources from November 2020.
Rents in the capital have slowly recovered since March 2017, but the latest official data from the Office for National Statistics show they reversed from a 1.2% year-on-year increase in September to just 0.9% last month.
The fear is the dreaded ripple effect. In the past, house prices and rents have slowly followed what happens in London, even though the impact may take months or even years to catch up in the rest of the country.
Here's a round-up of the data to judge how rents are performing where you are.
The ONS data lags the market by a month, so October’s figures are the latest. Based on a sample of more than 500,000 properties across the country, the ONS says average UK rents rose by 1.4% in the year to October 31 – a slight drop from 1.5% in September. For tenants and landlords, a home rented out for £500 a month in October 2019 now commands a rent of £507. By country, buy-to-let rents grew year-on-year by 1.4% in England, 1.6% in Wales and 0.8% in Scotland.
“Growth in private rental prices paid by tenants in the UK has generally slowed since the beginning of 2016, driven mainly by a slowdown in London over the same period. Rental growth has started to pick up since the end of 2018, driven by strengthening growth in London. Rental growth has remained broadly flat since November 2019,” says the ONS report.
“In the year to October 2020, rental prices for the UK excluding London increased by 1.6%, unchanged since June 2020. London private rental prices increased by 0.9% in the 12 months to October 2020, down from 1.2% in the 12 months to September 2020. This is the biggest slowing seen in private rental prices in London since March 2017.”
The trend is for rents to rise, adds the ONS. Since January 2015, private rents have gone up by 9.6%.
The East Midlands continues to post the largest annual rent rises in England, with a 2.4% increase, but this was down from last month’s growth of 2.6%.
The regions with the next largest increase were the South West and West Midlands, at 2.3%. The lowest rent rises were in London and the South East – where rents were up 1.1%.
Read the full ONS rental report for October 2020
Several property businesses and other organisations produce their rent statistics.
Here is a digest of some of the data:
Average UK rents are now £974 a month, according to tenant referencing firm Homelet. That’s down 1.3% from September but up 2.2% in a year. Other takeaways from the report include:
Martin Totty, chief executive at HomeLet, said: “There’s something strange – though maybe not that surprising – happening in the rental sector. “In the key Greater London area, it’s maybe more about demand falling faster than supply leading to depressed rents, whilst in the regions, perhaps the reverse is more typical, with a tightening of stock ‘pinching’ demand and moving average rates gradually upwards. And, against all of this we have the backdrop of a more buoyant sales sector, albeit one with a still uncertain outlook beyond next March.
“For landlords prepared to tough it out, it looks like in most parts of the country, demand is still there, whilst in the capital, equilibrium may seem a little further away. “
At least the government recognise the value of the property sector and the multiplier effect it has on the economy. This time around, that argument now seems unequivocal, with letting agents able to continue ‘business as usual’ while adhering to all COVID safety guidelines.”
Read the full Homelet rental report for October
| Region | Oct 20 | Sep 20 | October 19 | Monthly change | Yearly change |
| South West | £892 | £902 | £840 | -1.10% | 6.20% |
| East Midlands | £678 | £678 | £642 | 0.00% | 5.60% |
| Wales | £657 | £650 | £623 | 1.10% | 5.50% |
| North West | £764 | £770 | £727 | -0.80% | 5.10% |
| East Of England | £961 | £967 | £924 | -0.60% | 4.00% |
| West Midlands | £733 | £747 | £706 | -1.90% | 3.80% |
| Yorkshire & Humberside | £675 | £673 | £653 | 0.30% | 3.40% |
| South East | £1,053 | £1,074 | £1,020 | -2.00% | 3.20% |
| Scotland | £693 | £683 | £674 | 1.50% | 2.80% |
| North East | £546 | £558 | £538 | -2.20% | 1.50% |
| Greater London | £1,603 | £1,646 | £1,665 | -2.60% | -3.70% |
| UK | £974 | £987 | £953 | -1.30% | 2.20% |
| UK without Greater London | £821 | £828 | £788 | -0.80% | 4.20% |
Source: Homelet
The latest quarterly rental report from property portal Zoopla puts average annual rents at £890 a month, up from £859 a year ago. As a percentage, that’s a growth of 1.7% - a 0.4% increase on last year’s Q3 figure of 1.3%.
“Rental growth is being supported across the country as demand outstrips supply. Demand is being underpinned by more potential first-time buyers staying in the market for longer, amid a squeeze in mortgage lending for those with smaller deposits,” says the report.
“Mirroring the sales market, there is rising renter demand for larger homes – particularly those with outside space. Time-to-let is now down from an average 20 days to 18 for flats – and it stands at just 16 days for houses.
“However, the rental market is running at two speeds. While rents are rising across most regions of the country, they have fallen sharply in London – down -5.2% year-on-year.”
Read the full Zoopla Q3 2020 rental report
For landlords confused by the stats and what they mean, here are some answers to the most asked questions about rents.
Check the data carefully. Different indices cover different periods, and the samples vary between reports. The ONS has the biggest sample, so it should return the most reliable figures, but the time taken to collect and analyse the statistics often means the ONS data lags behind the rest of the sector. ARLA derives insights from letting agents and provides what’s known in the trade as a sentiment survey rather than factual data. Homelet statistics are based on customer data, which may not fully reflect the market.
That’s a business decision for landlords. The rent statistics indicate how the market is moving but do not reflect demand from tenants and property standards in local neighbourhoods. Don’t forget the data is historical, so it gives a picture of what’s happened rather than what will happen.
That’s up to individual landlords. For instance, one index with a solid customer base in the same area as a landlord’s portfolio may align more closely with market rents for that neighbourhood. Average data is not much good if you don’t have an average home, and median rents will cover everything from a room in a shared house to a four-bedroom home. Extra research with local letting agents will likely give a better view of where a landlord should pitch a competitive rent and stop them from underselling.
Although several letting agents and property organisations publish regular rent statistics, many have been affected by the coronavirus lockdown that has their reports suspended or delayed.