Recently we released the first ever DPS Rent Index. The Index, which is to be published quarterly, was developed by Professor of Global Economy, Joe Nellis - who was jointly responsible for the research and development of the UK's leading house price measurement systems, the Halifax and the Nationwide House Price Indexes - and Catarina Figueira, Professor of Applied Economics and Policy, both of Cranfield School of Management. The database is the largest of its kind, and is the most reliable indicator of rental trends in the UK.
Last time, we found that since 2007, there has been a continuing trend of rents increasing across the UK year on year, despite the global financial crisis. We also found, when we looked at the third quarter of 2017, the average UK rent was £775.13, which was £157.69 (25.5%) higher than it was a decade before, and represented a third (32.59%) of median monthly salary.
So what do the latest figures show?
In 2017, average UK rents rose at less than half the rate they did in 2016.
Crunching the numbers from a decade of data about millions of properties across England, Wales, Scotland and Northern Ireland, we found that the average UK monthly rent during 2017 increased by just 1.63%. This saw the national average go to £773.74 from £761.31 during 2017; this was half the rate of growth during 2016 (3.25% from £737.33).
The slowdown was particularly pronounced in London, which saw the lowest increase in average rent of any British region, increasing by just £5.83 or 0.44% to £1,324.29 (from £1,318.46).
Our Managing Director, Julian Foster, said: “Rent growth was slower in 2017 than 2016 when compared to inflation and wages, suggesting that general economic uncertainty is affecting the private rental sector particularly.
“London’s growth was particularly sluggish, bringing down the national average further, although rents here and outside the capital remain a large proportion of wages.
“The current slowdown in fact began in mid-2016 and is likely to be linked to the EU referendum result; it will be interesting to watch the Index as the UK government’s negotiations with the E27 and other economic influences progress during 2018.”
Excluding London, average monthly rent in the UK grew faster: £13.95 or 2.11% to £675.82 (from £661.88).
Nevertheless, rent growth outside of London in 2017 was still significantly slower than in 2016, when the average increased by £21.78 or 3.40% (from £661.88).
What about rent as a proportion of salary?
For the first time since 2013, rental growth in 2017 was lower than the rate of inflation (2.70%).
During 2017, incomes grew slightly faster than rents; average rent represented 32.54% of average salary (compared to 32.65% in 2016).
Northern Ireland saw the highest percentage rise in average monthly rent during 2017: £18.76 or 3.66% (from £512.74 to £531.74), as well as the largest increase in rent as a proportion of salary during last year, rising by 0.85% from 23.88% to 24.73%.
In the rest of the UK, the East saw the highest percentage rise in average monthly rent during 2017: a 3.15% or £24.57 increase from £782.44 to £807.01.
Rents in London represented the highest proportion of wages during 2017 (43.04%), whereas outside the capital, average rent in the South East represents the highest proportion of salary (35.01%); the North East the lowest (25.05%).
Did the type of property affect the numbers?
Rent for semi-detached houses experienced the biggest increase in value of the four property types during the course of 2017 (£18.93 or 2.43% from £780.57 to £799.50).
Rent for flats experienced the lowest increase in value of the four property types: (£9.56 or 1.22% from £782.20 to £791.76).