Is the South East property market overheating?

60% of tenants assume they will be paying higher rents this time next year, especially in London and South East

Alex Johnson@shedworking
Thursday 13 September 2012 10:03

Six out of ten tenants expect to be paying more for their rented accommodation in a year’s time, up from 53% a year ago, according to Rightmove’s latest figures.

In fact 66%, of tenants in London and 62% in the South East expect to be paying more at a time when 31% of tenants in the South East and 29% in London are already spending more than 50% of ‘take-home’ pay on rent. The national average is 26%.

“The view from the majority of tenants across the country is that rents are only likely to go one way, and that’s up," said Miles Shipside, director and housing market analyst at Rightmove. "London and the surrounding commuter belt of the South East have the greatest proportion of respondents predicting higher rents, suggesting that these markets are most at risk of ‘over-heating’ and most in need of further investment from investor-landlords.

"The continuing heat applied to rents is a double-whammy for the one in two tenants that would like to buy but can’t afford to. These ‘trapped renters’ are faced with the prospect of a downward spiral where spending more income on rent also means saving less for a deposit.”

Rightmove’s research also indicates that an average return for a rental property is higher in the North than in London and the South East. The average rental yield in the North East is 6.5%, the highest in the UK ahead of North West (6.4%) and Wales (6.2%). In contrast, investors in London experience an average rental yield of 5.7%, and in the South East 5.6%.

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