Guild of Landlords Rent Digest – July 2021

Rent rises are still stuck in the doldrums and rising at half the inflation rate. This is our rent digest for July 2021. 

The annual inflation figure for June posted a 2.4 per cent increase, and rents were up 1.2 per cent rise – where they have stuck since April. Meanwhile, letting agents report rental demand is at an all-time high, but the number of rental properties coming to the market is falling. Data from the Office for National Statistics (ONS) shows rents have trodden water since January 2020, slowly falling from a 1.5 per cent annual increase to the current level.

Change in rents: January 2020 – June 2021

Source: ONS

"Growth in private rental prices remained broadly flat between November 2019 and the end of 2020. However, the beginning of 2021 has seen rents prices slow, driven by prices in London," says the ONS rent report. 

"In the 12 months to June 2021, rental prices excluding London increased by 1.8 per cent, up from 1.7 per cent in May 2021. London private rental prices decreased by 0.1 per cent in the 12 months to June 2021, unchanged since May 2021. 

"Since November 2020, private rental price growth in London has slowed. As a result, London's rental price growth in June 2021  of - 0.1 per cent is lower than any other English region. 

"This reflects both a decrease in demand, such as remote working. In addition, shifting housing preferences means workers no longer need to be close to their offices. These changes have led to an increase in supply, such as too many short-term lets changing to long-term lets."

Rents are growing faster in Scotland than in England for the second month. However, the rate of increase stayed unchanged from May in England. The figures by country for the year ending June 2021 are:

• England including London: Rents up 1.1 per cent
• England excluding London:  Rents up 1.8 per cent
• Wales: Rents rose 1.5 per cent, down 0.1 per cent from April
• Scotland: Rents up 1.2 per cent year on year, down 0.1 per cent from May

Rents by region in England

The region's most significant year-on-year rent rise was 2.4 per cent, shared by the East and West Midlands. Rents are rising the slowest in London, which moved down 0.1 per cent.

Average rents burst past £1,000 for the first time

The average UK rent is now £1,007 – the highest ever, says tenant referencing agency Homelet. The latest monthly report from the price monitor plotted the first rent rise for more than a year in London – up 1.5 per cent to £1,607. However, this is still lower than the pre-COVID level of £1,611 set in June 2019. 

Excluding the capital, rents in England have surged by 10 per cent beyond pre-COVID prices to £861 a month.

Andy Halstead, HomeLet and Let Alliance CEO, said: "Throughout the Coronavirus pandemic, the government rightly took measures to protect tenants but didn't go far enough to balance the protection for landlords. 

"It's a continuation of the theme that we've seen for many years, with landlords being penalised by higher taxes and increased complexity in obtaining possession of their properties. 

"In simple terms, increased costs for landlords mean increased costs for tenants. "Some landlords have exited the market whilst the stamp duty holiday has stimulated the sales market, impacting the stock level. These are all factors driving an increase in rental values for new tenancies, which are way above the rate of inflation."

Homelet – Average UK rents by region

Source: Homelet

Guild of Landlords Rent Digest – FAQ

For landlords confused by the stats and what they mean, here are answers to the most asked questions about rents.

Why do the rent indices show different results?

Check the data carefully. Different indices cover different periods, and the samples vary between reports. The ONS has the most extensive sample, so the most reliable figures should return, 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 come from customer data, which may not fully reflect the market.

Should landlords raise rents in line with the stats?

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 that the data is historical, showing what's happened rather than what will happen.

Which rent index is the best?

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 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 is likely to indicate better where a landlord should pitch a competitive rent and stop them from underselling.

How has coronavirus disrupted the statistics?

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.