London rental market sees slow but steady growth in January

London rental market sees slow but steady growth in January

Rental prices in London saw their slowest annual rate of growth for almost two years in January, but continue to show sustained strength as prices remain markedly higher than they were just one year ago. 

New data from the latest HomeLet Rental Index shows that as of the end of January, the average rental price across the capital sits at some £1,510 per calendar month, which is 6.2 per cent higher than the price in evidence at the end of the same month in 2015. 

This was the slowest rate of increase in prices seen in London since March 2014, suggesting that the city may be coming towards an affordability ceiling in certain areas. But the fact prices continue to rise is indicative of a strong market with sustained levels of demand that continues to perform very well for investors. 

"It’s notable that there has been a further fall in the rate at which average rents in the Greater London area are rising. In recent years, the capital has seen much faster rates of increase than the rest of the country, but it may be that an affordability ceiling has now been reached in London and that rents will now track other parts of the UK more closely," said Martin Totty, CEO of Barbon Insurance Group, the HomeLet parent company. 

Sustained growth is something that has also been seen in the rental market as a whole over the last year. In every region of the UK, aside from the north west, January of this year saw higher prices than in the same month last year, with the average nationwide rental price, excluding London, coming in at £740 per calendar month. 

"The fact that UK wide average rents in the private rented sector continue to show sustained upwards growth reflects there is still strong demand for rental properties, driven mainly by the impact of the long term structural imbalance in supply and demand of property," Mr Totty said. 

He also explained that the continued climb in new tenancy prices is indicative of a stronger economic position where tenants are proving they have the ability to pay higher prices for their properties.