The region with the fastest growth over the period was London at 1.4%.
Nick Barnes, Head of Research
The ONS Index of Private Housing Rental Prices reveals that average national rents rose by 1.0% in the year to June 2014. The region with the fastest growth over the period was London at 1.4%. The general rental market in the Capital is seeing stronger rental growth (more than twice the rate of annual growth) than the prime sector as a result of a much tighter supply/demand situation.
It is worth bearing in mind that even the higher rental growth seen in London is still lagging consumer price inflation which stood at 1.9% in the year to June 2014. However, average annual earnings growth (0.4% in the year to May 2014) is only running at around one fifth of CPI and less than one third of average London rental growth. Thus rental growth, albeit on the face of it relatively modest, is nonetheless outpacing average earnings which is a major reason why the private rented sector has become increasingly unaffordable for many tenants.
After a difficult 2013, the prime London residential lettings market began to show signs of improvement in the first quarter of this year. This recovery gathered momentum in Q2 as tenant demand picked up and stock levels reduced.
Tenant demand has increased (new applicants were 9.2% higher in H1 2014 than in the corresponding period in 2013) in part due to many renters being priced out of the sales market but also because landlords remain flexible on rent negotiations in order to retain good existing tenants and to attract new ones in a still competitive market.
Rents, after having declined for much of last year have nonetheless shown modest uplift this year, rising by 0.6% in the first half of 2014. We anticipate further reduction in available stock over the remainder of the year and a steady increase in tenant demand which is likely to continue to nudge rents upwards.