Buy-To-Let Inflation Affect on Rents

The Office of National Statistics has published average regional and national rents since 2005.

Since 2005 rents across the UK have risen by significantly less than inflation as measured by the CPI. In England as a whole they rose by 7.6% and in London by 10.6%. In that time the CPI rose by 25.8%, while average earnings rose about 15.2%.

Much of the period since 2005 will have been affected by the financial crash which began in 2008. Unfortunately there is no good source of market rent data for the UK prior to 2005, so it is hard to identify longer term trends.

We would expect rents to be affected by supply and demand. There has been a steady growth in the supply of rental properties over that period. The demand has also grown with many potential first time buyers finding it hard to raise the finance to make their first purchase, and remaining in rented accommodation.

The UK Rental Index Map published by Homelet gives a good indication of the relative strength of the rental market in each region.
Fig 12: UK Rental Index Map by Homelet

The RICS publish a quarterly UK Residential Lettings Survey based on a survey of the views of surveyors in each region of the country. This provides information on changes in both demand and supply of rental properties, and in rents, together with anecdotal summaries of what is happening in regional rental markets. It is based on the opinions of surveyors, and not on transactional data. This can identify trends some time before they show up in more robust statistics.

It would be unwise, given these statistics, to presume that rents might rise in future by much more than the rate of inflation, although this will very much depend on local supply and demand.