Buy-to-let rents rise to all-time high as demand for homes outstrips supply

The average monthly rent for a home in England and Wales rose to an all-time high of £846 in July, amid strong demand for let accommodation.

The overall figure for England and Wales was 5.2% higher than a year previously, according to the latest monthly index of buy-to-let rentals from the estate agents Your Move. The biggest year-on-year increase occurred in south-east England, with rental costs rising by nearly 15% to £924 as people moved out of London to escape the capital’s high rents.

Rents had been expected to fall as landlords rushed to buy property ahead of the new stamp duty rates for buy-to-let properties in April. Your Move’s index shows a slowdown in the early part of summer, but surveys suggest that demand for rental property is outstripping supply.

The latest report from the Royal Institution of Chartered Surveyors (Rics), published on Thursday, shows demand from tenants gathered pace in July, while there was a reduction in the number of new properties for renting..

“This supply/demand mismatch is expected to squeeze rents higher during the year ahead,” a Rics spokesman said. “This is generally the case across the whole of the UK, although London is a slight exception, where respondents envisage virtually no rental growth over the coming 12 months.”

Your Move’s figures show that average rents in London were down by 0.7% in the 12 months to July, and, at £1,225, were below the peak of £1,301 recorded in September 2015. However, rents in the capital remained the highest across England and Wales. The cheapest region was Yorkshire and the Humber, where the average cost of new tenancies was £565 a month.

The agency also asked landlords about whether they planned to add to their portfolios following the UK’s decision to leave the EU. It found 72% were equally, or more likely, to buy more properties.

Adrian Gill, director of Your Move, said: “The UK’s vote to leave the EU has not caused any immediate change in the rental market, although we must wait for longer term trends to develop. For landlords, market sentiment remains positive with the vast majority still looking to add to their portfolio of properties, despite the Brexit vote.”

Separate figures from the estate agent Knight Frank also show that landlords in London have seen prices fall. Its figures for the market in prime central London show that in the capital’s most upmarket districts rents were down by 4.1% year-on-year in July. Knight Frank said the number of properties available for rent in the three months to July 2016 was nearly 40% higher than in the same period of 2015, while the number of prospective tenants had risen by 7.2%.

Tom Bill, Knight Frank’s head of London residential research, said: “Supply has increased steadily over the last year due to uncertainty over price growth in the sales market following a series of tax rises and, to a lesser extent, the potential impact of the UK’s decision to leave the [union]. As supply increases at a faster rate than demand, it means landlords have to show increased levels of flexibility when negotiating with tenants. In addition to levels of rent, this includes flexibility around break clauses, works to the property, levels of furnishing and payment arrangements.”