Rents rise for fifth month in a row
Friday 21 September 2012
Private rents have soared for the fifth month in a row to reach a new high as pressure on the sector continues to be ramped up, a study has found.
Typical monthly rents increased by 2.9% year-on-year to reach £734 in August, surpassing a previous peak of £725 recorded in July, according to lettings network LSL Property Services, which owns chains including Your Move and Reeds Rains.
The study put the latest increase down to the seasonal effect of a wave of graduates starting new jobs, on top of strong competition already caused by frustrated would-be buyers who are unable to raise a mortgage deposit or meet lenders' toughened borrowing criteria.
Rents rocketed to new highs in five regions across England and Wales, hitting peaks in London, the South East, the East of England, the North West and Yorkshire and the Humber.
London saw the biggest year-on-year increase at 4.9% while only the South West and Wales saw rents decrease, by 1.9% and 1.8% respectively.
David Newnes, director of LSL Property Services, said: "The rental market is right in the thick of its peak season and the demand from graduates and those starting new jobs has added a new layer of competition on top of the existing pool of frustrated buyers.
"London and the South East may be the powerhouses of the national rental market but rent rises haven't been limited to these areas by any means.
"In fact, rents have hit record highs in five regions as tight mortgage finance criteria and large deposit requirements for new buyers continue to ramp up the pressure on the limited stock of rental homes available."
Lenders have predicted that a recently-launched £80 billion "funding for lending" scheme to unclog the flow of credit and a NewBuy scheme, which helps people to buy new-build homes with a fraction of the usual deposit, will help people to get on the property ladder in the coming months.
However, much of the recent competition among lenders has been concentrated around less "risky" buyers with larger deposits of about 40%.
Mr Newnes said: "Some relief for tenants may be found if the funding for lending scheme begins to feed through into greater lending to borrowers with smaller deposits.
"But any improvement to the first-time buyer mortgage market will need to be significant and sustained to dent rental demand markedly in the long-term."
Despite the squeeze on tenants, their ability to keep up with payments improved for the first time in three months in August, with 9% of all rent late or unpaid at the end of the month, a decrease from 9.3% in July.
This could be partly due to a "surprisingly resilient" labour market amid the weak economy, although people will continue to come under pressure as rent rises are outstripping wage growth, the study said.
Shelter chief executive Campbell Robb said: "At a time when wages are stagnating, this latest rise in rents is another blow to the millions of people priced out of a home of their own and left at the mercy of an overheated rental market.
"Many of these people will be struggling to keep a roof over their head, let alone save enough for a deposit on a home of their own."
Here are the typical monthly rents in each region in August, followed by the year-on-year percentage change:
:: London, £1,074, 4.9%
:: East of England,£752, 1.9%
:: South West£633, minus 1.9%
:: Yorkshire and the Humber, £544, 3.6%
:: North West, £591, 2.9%
:: Wales, £548, minus 1.8%
:: South East, £761, 3.9%
:: North East, £524, 0.2%
:: West Midlands, £569, 3.6%
:: East Midlands, £551, 1.0%
:: England and Wales, £734, 2.9%
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