The UK\u2019s rental market has seen strong growth over the last year with rents stabilising in the third quarter to an average rent of \u00a3970 per calendar month after an initial fall in price in August. The market has seen a 2 percent increase in rents from September 2011, just 0.6 percent below the rate of inflation over the year.<\/p>\n
After an initial boost in rental prices in London as landlords looked to catch some of the surge in interest in short term lets in the capital over the Olympics, prices have now stabilised and increased slightly to a more realistic level after a fall in the second quarter of 2012. At present, prices in London remain over twice the national average, with those of properties in the South East also remaining higher than average. However the most encouraging rent increases have been seen in Yorkshire and Humber, with prices rising by 7 percent in the third quarter.<\/p>\n
The latest Rightmove consumer rental forecast shows that 60 percent of tenants expect to be paying higher rents by this time next year, with the greatest expectation of rent increases in London and the South East.<\/p>\n
The statistics are likely to put further pressure on tenants in the region who are already facing higher rents than elsewhere with 31 percent of tenants in the South East and 29 percent of tenants in London reported to already be spending over 50 percent of their salary after tax on their rent \u2013 well above the national average of 26 percent.<\/p>\n
Miles Shipside, director and housing market analyst at Righmove, comments: \u201cThe view from the majority of tenants across the country is that rents are only likely to go one way, and that\u2019s up. 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 \u2018over-heating\u2019 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\u2019t afford to. These \u2018trapped renters\u2019 are faced with the prospect of a downward spiral where spending more income on rent also means saving less for a deposit.\u201d<\/p>\n
A report by the National Housing Association found that the cost of privately renting a home in England has risen by over 37 percent in the past five years, with it anticipated that in a further five years rents will be a third higher than at present. This increase is expected to come around as interest rates rise and house prices increase. The soaring rents have meant that since 2009 there has been an 86 percent increase in working people relying on housing benefit to help them pay for their rent, with 417,830 people now in this position.<\/p>\n
David Orr, chief executive of the National Housing Federation, says: \u201cWe now have millions of families struggling to keep on top of their rents, priced out of the housing market and nearly 10,000 more working families each month are now reliant on housing benefit to help pay their private rent. These people are the \u2018strivers\u2019 the Government wants to help, yet their future is looking bleak. This cannot continue, we need action now to address the cause of rising house costs, not just the symptoms. Only by addressing the chronic undersupply of new homes can we stem the financial pressure on families and Government.\u201d<\/p>\n
Figures from Templeton LPA also show that whilst the rate of growth of tenants in arrears is slowing, the third quarter of 2012 saw an increase of 1.6 percent of tenants in arrears with 99,000 tenants in arrears of two months or more. This is 15 percent higher than last year and is now at the highest level since 2008 with tenants in severe arrears representing 2.5 percent of tenancies in England and Wales.<\/p>\n
However, the figures from the last quarter, and the positive forecast for future rent growth in the UK rental market provide generally encouraging news for buy-to-let investors looking to move into the current rental market, with letting agents noting a rise in the number of prospective landlords making enquiries as rental demand boosts interest in the market. In London there has been a surge of interest from foreign landlords looking to buy properties to rent which has kept prices high throughout the region.<\/p>\n
Recent Rightmove statistics have also shown that of those looking to invest in property over the next 12 months the majority of likely investors tend to be looking at northern regions of the country where recent research into rental yields shows that the average return is typically above 6 percent, compared with London and the South East where profits from investment properties are likely to be smaller.\u00a0 However whilst this provides renters in the north greater choice and slows the rental increases in northern regions of the country, this may be of some concern to those in southern parts of the country where upward pressure on rents is much higher.<\/p>\n
The current rental market remains strong across the country as a generation of potential first time buyers find themselves unable to step onto the property ladder. Recent reports have suggested that first time buyers in the UK, facing stricter regulations on mortgage lending, will be looking at an eight and a half year wait to save up for a deposit on a property. At present the average age of a first time buyer is 37. Whilst this is encouraging for investors as the increase in demand makes it a strong prospective market to move into, it may mean that a generation will find they are unable to move out of rental property and into a home of their own.<\/p>\n