ONS figures reveal rental growth slowdown

Growth in rental prices has slowed in the last month, according to the latest figures from the Office for National Statistics.

Average private sector rents in Britain have increased by just one per cent annually in the year to September 2014.

On a country by country basis, rents in England were up by one per cent, those in Scotland increased by 1.4 per cent, while Wales only saw growth of 0.2 per cent.

Rents in all English regions were up, with the highest annual growth noted in London at a rate of 1.5 per cent.

Year-on-year growth is suggested in a number of studies into the buy to let and rental markets, although rates of growth do appear to be slowing.

The latest Buy to Let Index from Your Move and Reeds Rains showed that rents reached new highs in September – in contradiction of the government figures – but both studies reported a slowdown.

It means rents are increasing at levels below earnings for the first time for several years – average annual earnings growth stood at 1.2 per cent in August.

While slightly lower rents could potentially mean smaller returns for investors, it also means more people may be able to access the rental market, boosting demand in the process.

This decreases the likelihood of void periods, so the impact on potential returns for buy to let investors could be minimal.

The most recent Landlord Opinion Survey from LSL Property Services showed that 41 per cent of rental property owners had reported an increase in demand during the past six months.

Rising house prices are also driving this trend as renting is increasingly more cost-effective than attempting to buy a property.

This increase in demand, alongside consistent levels of rental yields, provides an encouraging backdrop for investors despite a slowdown in rental levels.