Rent growth continues to outpace rising pay in the UK, but is now "moderating". Rents are rising in 11 of the country's 12 regions, according to the HomeLet Rental Index for August 2016.
The average rent per month on new tenancies in the UK rose 3.1% in the year to August, reaching £913. By contrast, ONS figures show pay rose by 2.3%, excluding bonuses, in the year to June. But UK rent growth is down from a rate of around 6% a year before and between 3.5% and 3.8% in the preceding four months.
HomeLet's figures say rents are growing quickest in the East of England. The average was 5.8% higher over the year at £915. Rents fell 1.6% in the North East to a £535 monthly average. The highest rents are in Greater London, with an average of £1,497 after rising 2.7% over the year.
Martin Totty, Barbon Insurance Group's chief executive, says the index suggests rents are rising "at a sustainable pace".
"In the medium to longer term, the fundamental driver of rents will be the balance between demand and supply for rented property," he said.
"We expect demand in the private rental sector to continue to grow, in line with demographic changes such as population growth, and as affordability concerns remain in the house purchase market, so it is important that we see efforts to support supply."
Landlords have been hit with a number of tax hikes by the Treasury as policymakers seek to cool demand from property investors to reduce competition in the market for first-time buyers. Stamp duty on purchases of additional properties is now subject to a 3% surcharge. Moreover, landlord tax reliefs for mortgage interest and maintenance costs have been cut back.
Rising rents are fuelled by a general lack of housing supply in England, particularly urban areas such as London. Housebuilding is running well below estimates of demand, with experts putting the figure at around 250,000 new units needed a year. There were 142,390 completions in England and Wales in 2015, a 20% annual rise, according to government figures.
HomeLet Rental Index August 2016
|Region||Average rent in August 2016||Average rent in July 2016||Average rent in August 2015||Monthly variation||Annual variation|
|East of England||£915||£911||£864||0.40%||5.80%|
|Yorkshire & Humberside||£640||£637||£632||0.50%||1.30%|
|Notes:||Based on new tenancies in August 2016||Based on new tenancies in July 2016||Based on new tenancies in August 2015||Comparison of average rent in August 2016 and July 2016||Comparison of average rent in August 2016 and August 2015|