Guild of Landlords Rent Digest – August 2020

Keeping an eye on rents to ensure your properties stay competitive but still make as much profit as possible is a crucial task for landlords. Here's a digest of some of the leading UK rent indices to help with the leg work of looking up all those statistics on different websites.

ONS Rents – July 2020

Landlords saw buy to let rents rise by 1.4% in the year to the end of July, according to Office for National Statistics data. The data revealed a slight dip – from an annual increase of 1.5% in June. 

In financial terms, a home renting for £500 a month in July 2019 now commands a rent of £507a month. 

The ONS Index of Private Housing Rental Prices says rental increases have slowed across the UK since January 2016, mainly due to a slowdown starting in London, but have hit a plateau since November 2019. 

In the year to July, UK rents excluding London were up 1.6%, where they have sat since April. In London, rents stalled at 1.1%, down from 1.2% in June. Over the longer term, the trend between January 2015 and July disclosed rents were up 9.3%.

Rents by country

Landlords in England put rents up 1.4% in the year to July, slightly lower than the annual rise of 1.5% recorded for June. Excluding London, rent increases in England were pegged at 1.7% for the third month in July.

In Wales, rents increased 1.6% in the year to July, up from 1.4% in the year to June. In Scotland, tenants paid just 0.6% more in the year to July, the same as in the year to May.

Rents by region in England

The largest yearly rent rise in July was in the South West, at 2.5%, unchanged since May, followed by the East Midlands, at 2.4%. The lowest increase was in the North East, where annual rents were up 0.9% in July, followed by the South East, with a 1.0% increase.

ONS Quarterly Market Summary – England April 2019 to March 2020

The main points from the report were:

• Median monthly rents were the highest ever at £700
• The most expensive median rent was £1,425 a month in London
• The cheapest median rent was £495 a month in the North East

The highest rents were in London and were higher in Central London than in the outside boroughs. 

The median monthly rent was £1,700 in Central London and £1,295 in Outer London. Rents in Central London were at their highest in Westminster (£2,492) and lowest in Lewisham (£1,300). For Outer London, Richmond upon Thames (£1,550) was the most expensive area, while Bexley, Croydon and Sutton shared the lowest median rent (£1,100). 

The local authority with the cheapest median monthly rent was Kingston upon Hull (Yorkshire and The Humber) at £420. The highest rents were in Yorkshire and The Humber, shared by York and Harrogate (£750). The North East has the lowest rent - £495 a month. 

The local authority with the highest rents in the North East was in Newcastle upon Tyne (£650), while the cheapest were County Durham, Darlington and Hartlepool – all recording £450.

Rents by local authority

ONS Private rental market summary statistics in England: April 2019 to March 2020

Rent statistics from other sources

Several property businesses and other organisations produce their rent statistics. Here is a digest of some of the data:

Homelet Rental Index – July 2020

Tenant referencing firm Homelet says the average monthly rent for a new tenancy in the UK in July was £965 a month, up 0.6% from a year earlier. Other takeaways from the report include:

• Average rents in London fell 3.2% in the year to £1,611
• Excluding London, the average UK monthly rent was £808, up 1.4% from the previous year
• In July, average rents in London (£1,611) were 99% higher than in the rest of the UK, excluding London (£808).

Martin Totty, chief executive at HomeLet, said: “July appeared to be yet another encouraging month for lettings – with a rise in rental prices across all of the twelve regions monitored compared to June - although the data does indicate a downward trend emerging YOY for those in the South East and Greater London. “Demand for new tenancies is still strong, and HomeLet received the same volume of property applications for tenant reference checks this month as last year. That coupled with the steadily increasing rents is positive for the sector, but there’s naturally caution around what could happen over the coming months.”

Homelet Rental Index by region – July 2020

Source: Homelet HomeLet Rental Index - July 2020

ARLA Market Outlook – August 2020

Rental property demand is outpacing the homes to rent coming to the market in many places, which is driving up rents, says the ARLA market report. 

“The gap is narrowing will steady rents for the rest of the year,” said an ARLA spokesman. 

“Outside of London, a similar rise in annual rental growth is expected, although the picture in London shows rents down 3% since January as rising supply and more subdued demand, due to changed working, tourism and student patterns impacting the market. The same picture is emerging in Edinburgh with a move from short lets to long lets creating a rise in supply.”

Deposit Protection Service – UK Rent Index Q2 2020

The Deposit Protection Service rent tracker posted drops in the South East, Scotland and the West Midlands, while those in London stayed the same for the third month. Like other rent trackers, DPS found the cheapest rents in the UK are in the North East, where they average £524 a month – up just £1 in a year.

DPS UK rents by region – Q2 2020

Source: TDP Deposit Protection Service – UK Rent Index Q2 2020

Guild of Landlords Rent Digest – FAQ

For landlords confused by the stats and what they mean, here are some 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 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 solid data. Homelet and DPS statistics are based on their customer base, 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 the data is historical, so it gives a picture of 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 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.