The pace of rental inflation for new tenancies continued to slow in August as landlords balance tenant affordability and the need for a decent return, according to referencing firm HomeLet.
HomeLet’s August Rental Index found that new rental agreements were up 3.1% in August on an annual basis, continuing a trend of slower growth.
Over the past four months, annual increases have been between 3.5% and 3.8%, while it was running at close to 6% this time last year.
The average new rental agreement in the UK now stands at £913 a month, compared to £885 per month in August 2015, according to the index.
Rents continue to rise in almost every area of the country, with 11 out of the 12 regions surveyed recording an increase over the year to the end of August.
The biggest increases were in the East of England and Wales where rents were up 5.8% and 5.2% respectively to £915 and £654.
London rents only rose 2.7% but were still the highest at £1,497 on average.
Martin Totty, chief executive of HomeLet parent company the Barbon Insurance Group, said: “The latest HomeLet Rental Index reflects a private rental market in which landlords are engaged in a delicate balancing act: they’re acutely aware of tenants’ concerns about affordability while also conscious of the need to achieve their target yields against a backdrop of rising costs.
“August’s figures suggest that rents are continuing to rise at a sustainable pace – ahead of price inflation, but well below house price increases, which were running at close to 6% according to the most recent data.
“In the medium to longer term, the fundamental driver of rents will be the balance between demand and supply for rented property.
“We expect demand in the private rental sector to continue to grow, in line with demographic changes such as population growth, and as affordability concerns remain in the house purchase market, so it is important that we see efforts to support supply.”