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London rents fall for first time in eight years

Anna Isaac
Londoners are seeing rent growth fall slightly, the first such shift since 2010 - REUTERS

London's renters have seen prices fall for the first time since 2010, while the wider housing market continues to cool, official data has revealed.

For the first time in nearly eight years, London rents fell by 0.2pc in the year to May. Across the UK, rents were flat, the Office for National Statistics (ONS) said. 

The growth rate of London rental prices has been slowing since August 2014, when it hit a peak of 4.3pc. 

Meanwhile, house prices grew overall, and returned to growth in London. Residential property prices grew by 3.9pc in the year to April, down from 4.2pc in the twelve months to March.

The two measures - rental prices and sales prices - influence one another.

Changes in rental price growth “broadly track” shifts in house price growth, according to the ONS. However, because of the nature of tenancy arrangements, these movements can take around 14 months to feed through to the rental market, and are less pronounced.

Overall, rents rose by 1pc in England and 1.2pc in Wales, while in Scotland they increased by 0.6pc in the year to May.

Hansen Lu of Capital Economics warned that the rate of house price rises in London was still the slowest of all regions, and should not be seen as a sign of recovery.

“After all, prices there are still very high, and new buyer enquiries are falling,” Mr Lu added.

The prospect of rises in interest rates has had a dampening effect on the housing market, economists note, but there are other reasons for fewer houses being bought and sold.

Samuel Tombs of Pantheon Macroeconomics said that “supply also has contracted sharply”. This was because few homeowners are being made redundant and therefore forced to sell their properties in a weak market.

The picture in other regions remained brighter than London, which came bottom of the league table. The South West and the West Midlands both saw price rises of more than 6pc.

Mike Hardie of the ONS said that across the UK annual house price growth “continued to slow”, but there was an offsetting effect, with London’s sluggish rise counterbalanced with the sharper increases elsewhere.

Caroline Simmons, of UBS Wealth Management said the housing market slowdown was set to last for the “foreseeable future”.

She added: “In fact over the course of 2018 and 2019, we expect yearly growth of between 2pc and 3pc.”