Rents in the British private rental sector increased by 2.4% in the 12 months to June 2016, down from 2.5% when compared with the year to May 2016, the latest index shows.
Rents increased by 2.5% in England and by 0.1% in Scotland but fell by 0.1% in Wales, according to the data from the Office of National Statistics (ONS).
Rental prices increased in all the English regions over the year to June 2016, with rental prices increasing the most in the South East at 3.4%, but overall when London is excluded rents grew by 2%.
The index report reveals that since January 2011 England rental prices have increased more than those of Wales and Scotland. The annual rate of change in Wales continues to be well below that of England and the Great Britain average.
Meanwhile, rental growth in Scotland has gradually slowed to 0.1% in the year to June 2016, from a high of 2.1% in the year to June 2015.
Rental prices in England show three distinct periods; increasing from January 2005 until February 2009, decreasing from July 2009 to February 2010, and increasing from May 2010 onwards.
When London is excluded, England shows a similar pattern but with slower rental price increases from around the end of 2010 and since the beginning of 2012, English rental prices have shown annual increases ranging between 1.4% and 3% year on year.
The largest annual rental price increases were in the South East with growth of 3.4%, unchanged from May 2016, followed by the East of England up 3.1%, down from 3.2% in May 2016 and London up 3%, down from 3.3%.
The lowest annual rental price increases were in the North East at 0.8% and the North West at 1.2%, both unchanged when compared with May 2016 and Yorkshire and The Humber at 1.3%, up from 1.2% over the same period.
Looking at data from the UK House Price Index over a longer period shows residential house price growth has typically been stronger than rental price growth for a number of years, with an average 12 month rate of house price inflation between January 2013 and May 2016 of 5.9%, compared with 2.1% for rental prices.
The report suggests that inflation in the rental market is likely to have been caused by demand in the market outpacing supply. On the demand side, the Royal Institute of Chartered Surveyors (RICS) reported an increase in demand in June in their residential market survey, however, demand from prospective tenants decreased marginally in May according to the Association of Residential Letting Agents (ARLA).
On the supply side, RICS reported that new landlord instructions fell slightly in June and ARLA reported that the supply of rental stock fell in May 2016 and was lower than in May last year.
The report also suggest that with the UK economy continuing to grow and labour market conditions being robust in recent months by historic standards with employment at a record high and unemployment low at 4.9%, confidence is likely to remain high.
While pay grew by 2.2% in the three months to May 2016 compared with the same period last year, continuing a revival of real earnings growth, it points out that rental prices have continued to grow at a slightly faster rate than real wages in recent months.
source: Property Wire
