Rents rose on average across the UK at less than half the rate as a year before during December, said the landlord insurer HomeLet, though there are sharp regional differences.
The HomeLet Rental Index said the average UK rent hit £892 per month in December 2016 after growing by 1.7% over the year, significantly below the 3.8% annual rate in December 2015. Month-on-month, the average UK rent dropped by 0.6%.
What is next for rents is unclear as landlords digest a number of tax increases on buy-to-let, the next of which will be the staggered removal from April 2017 of a relief that allowed them to offset their mortgage interest costs against income tax.
Landlords could hike rents as a consequence, but hard-pressed tenants may be unable to bear further rises. Soon, landlords will also bear the cost of letting agent fees as the government prepares to introduce a ban on these fees for tenants.
"While demand for rental property remains strong, landlords always have to be mindful of tenants' ability to pay higher prices," said Martin Totty, chief executive of HomeLet, adding that the data "suggests we have now begun to approach an affordability ceiling, particularly in areas of the country where rental price inflation was previously highest".
"While the industry has speculated that landlords will increase rents to mitigate the impact of factors such as the impending reductions in mortgage interest tax relief," he said, "this may prove problematic given the pricing trends we're currently seeing in the market and the potential for higher inflation and a squeeze on real earnings in 2017."
Beneath the headline figure for the UK, rents were rising fastest in Northern Ireland, where the average increased 6.4% over the year to £602 per month. Month-on-month, it saw 0.1% growth. The East Midlands was bottom of the regional table after the average rent fell by 0.4% on an annual basis and 0.8% on November, reaching £585.
London continues to have the highest rents, fueled by a severe housing crisis in the city, though affordability constraints are now holding back further rises. The average rent in London hit £1,508 after increasing by 2% over the year to December. On a monthly basis, however, the city's rents dell 1.6%.
Rental figures from the December 2016 HomeLet Rental Index
|Region||Average rent in December 2016||Average rent in November 2016||Average rent in December 2015||Monthly variation||Annual variation|
|East of England||£895||£897||£874||-0.2%||2.5%|
|UK excluding Greater London||£744||£745||£732||-0.1%||1.6%|
|Notes:||Based on new tenancies in December 2016||Based on new tenancies in November 2016||Based on new tenancies in December 2015||Comparison of average rent in December 2016 and November 2016||Comparison of average rent in December 2016 and December 2015|