Rents follow house prices and show first fall since 2009 crisis
R ents are falling year-on-year for the first time in eight years, adding to the picture of a rapidly cooling property market for both owners and tenants.
While some regions are still posting small gains in rents, the average change across the country is now negative for the first time since December 2009, according to the latest regular analysis by Homelet, the agency.
It describes this finding as a significant moment for the housing market.
Annual rental inflation was almost as high as 5pc in the middle of 2016 but has declined consistently since then. Homelet’s latest figure – for May – was the first to register an actual fall, in this case of 0.3pc.
The fall in London was the most significant, with rents across the capital 3pc down on this time last year.
A nalysts point to a number of factors slowing rental growth. These include lack of wage growth among the tenant population and a more cautious outlook about job security. An increase in the availability of mortgages for buyers with small deposits has also dampened tenant demand.
In London the supply of large numbers of new-build flats are a further brake on rents. Specialist central London investment firm LCP said its analysis of new-builds in one area showed a significant annual increase in available rental properties of 28pc .
T he firm said rents in this area, which forms the new Nine Elms redevelopment near Battersea, had been discounted by 6pc in three months .
The slowing of the rental market comes as property prices are also grinding into reverse.
Nationwide Building Society, Britain’s largest mutual mortgage lender, said last week that house prices were demonstrating their longest period of sustained decline since the same post-crisis period of 2009.
Life gets harder for buy-to-let investors
F alling rents will narrow returns for property investors – particularly recent buyers – at a time when their other costs and taxes are rising. Yields are already substantially lower than in 2011-12, when demand for rental property was high due to lack of mortgages for owner-occupier buyers.
Higher taxes were applied to mortgaged buy-to-let investors from April this year, in the form of the phased removal of tax relief on mortgage interest.
The changes to buy-to-let taxation will be phased in over four years.
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