The annual rate of residential rental growth in Britain doubled between June and July to 2.2%, driven by a turnaround in the London market, the latest research reveals.
Rental growth in London turned positive in July following eight months of falls. A decline in the number of homes available to rent of 18% year on year supported the growth, according to the monthly lettings index from Countrywide.
It also shows that a shortage of stock in the South of the country was driven by a fall in the number of homes being bought by landlords, down 50% since 2015 in London.
Indeed, rental growth across the South of the country has started to pick up as three of the four English regions where rents rose fastest were in the region, namely the South West, the East of England and Greater London. Outside these areas, Scotland saw the fastest rental growth of 3%.
Across Britain, the number of homes to rent grew 4% year on year but the rate of growth has slowed in each of the last 10 months. In London supply fell by 18%, in the East of England it was down 6% and in the South East down 5% compared to July last year.
In April 2016, the month after the introduction of the 3% stamp duty charge for additional homes, including buy to let landlords and investors, the number of homes on the market in Britain was 14% higher than in the previous year.
The report suggests that the steady fall in the number of homes available to rent in London has been driven by a drop in the number of landlords buying since the new stamp duty rates.
July saw the proportion of London homes bought by a landlord fall to the lowest level for seven years. Just 10.5% of the homes sold in the capital last month were bought by a landlord, the lowest level since August 2010 when it was 9.7% and half the 2015 average of 20.9%.
The drop in the number of homes to rent in London has not been matched by a fall in tenant numbers. The number of would-be tenants in the capital was unchanged on last year, up 1%, meaning the same number of people were chasing fewer homes. Outside London the number of tenants registering was down 5% on last year.
‘The rush to beat higher stamp duty rates in April 2016 caused a spike in the number of homes to rent, but that has now worked its way through the market. The stock of homes to rent is now falling in the more expensive parts of the country because higher tax rates have dissuaded large numbers of landlords from buying. Ultimately this means fewer homes on the market and higher rents,’ said Johnny Morris, research director at Countrywide.
‘Across the Midlands and the North, higher rates of stamp duty are much less of a disincentive to investors. Here the number of homes on the market remains up on last year, buoyed by investors living in London and the South East choosing to buy in the Midlands and the North,’ he added.
