Asking rents for new tenancies in the UK outside of London fell by 0.2% year on year in the third quarter of 2017, the first drop recorded at this time of year, the latest rental index shows.
The fall was driven by the South East with rents down 2.3% on the previous quarter and down annually for the first time, due to steadily increasing supply since last year’s second home stamp duty changes.
The data from the Rightmove rental tracker index also shows that in London asking rents fell by 3.3% year on year to their lowest at this time of year since 2013, although a drop in supply and increased demand could mean rental prices will start to rise again soon.
Excluding London the average rent is now £789 per month and in the capital it is £1,920. Outside of London the quarterly fall is significant with asking rents down 0.2% compared to a rise of 2.8% in the second quarter of the year.
A breakdown of the figures show that rents have also fallen in Yorkshire and Humber, down 0.2% on a quarterly basis to £595 per month but are still up 0.8% year on year.
The biggest quarterly rise was in the North East, up 2.6% to £564 and up 2.7% year on year, followed by Scotland with a quarterly rise of 1.8% to £667 but up just 0.2% on an annual basis.
Asking rents were up 1.3% in the North West to £660 and up 2.3% year on year. In the East Midlands they increased by 1% to £625 and by 2.5% year on year while in the West Midlands there was a 0.9% quarterly rise to £682 and they were 1.5% higher than a year ago.
The South West and Wales saw more modest quarterly growth of 0.2% and 0.4% to £799 and £634 respectively. Year on year they increase by 1.8% in the South West and by 3.3% in Wales.
Sam Mitchell, head of lettings at Rightmove, pointed out that asking rents for new properties coming on the market usually increase in the third quarter of the year, as historically it’s one of the busiest times for tenants looking for a new home. This year however, whilst demand is still strong, rents are pretty much at a standstill.
‘Since last April’s second home stamp duty changes came in the supply of new rental properties in the South East has been steadily increasing, up 5.5% on this time last year. Agents are reporting that some investors looking for better yields are shifting their focus from London to instead buy in the surrounding counties of Surrey, Berkshire and Buckinghamshire,’ Mitchell explained.
‘The increase in stock in the South East has led to softening in rents in some areas where there is less competition among tenants, but they are holding up in key commuter areas where tenant demand is strong,’ he said.
He also pointed out that last year the supply of rental properties in London increased as much as 26% when investors rushed to buy ahead of the stamp duty changes, leading to cooling rents over the last 12 months in the capital. ‘Now it appears that rental investors are starting to move their money away from London with a number of agents across London saying that investors are being replaced by first time buyers. This is likely to constrict rental supply in the capital and lead to rents increasing again, so now would be a good time for prospective tenants to act, before this happens,’ Mitchell added.