Rental Rise!

by Mark Johnston

Rental Rise!

It appears that private renting is now big business.  A recent report estimates that in 2011 Britons paid around £48 billion in rent to private landlords, both individual and institutional, and this is expected to rise to £70 billion within five years.

According to a report released today by the HomeOwners Alliance, around five million people in the UK who want to live in their own home are having to rent instead.

Therefore landlords are now enjoying ever increasing rents, suggested the Royal institution of chartered Surveyors (RICS), with 34 per cent more surveyors reporting a rise in rents rather than a drop during the quarter.

 The Royal Institution of Chartered Surveyors (RICS) spokesperson James Scott-Lee stated, “The combination of strong tenant demand and a limited stock of good quality properties on offer is pushing rents ever higher across much of the country. This is the case both for houses and flats. Moreover, with mortgage finance for first time buyers likely to remain in short supply for some time to come, this imbalance is set to persist. The inevitable outcome is that rents will continue to increase”.

David Whittaker, Managing Director of Mortgages for Business, said: “The owner-occupier market is sinking deeper into the mire and is dragging property prices down with it.  It’s great news for buy-to-let investors, who are able to snap up cheaper property, usually at a higher loan to value because lenders are understandably willing to advance more when property prices are lower.  It’s a fairly simple equation: suppressed property prices, plus strong demand for rented accommodation, equals higher yields for landlords”.  

Figures from LSL Property Services found that average monthly rents hit an all-time high last month, rents are now 3.4 per cent higher than they were at the same time last year.

Whilst rents have steadily risen for the last few years, it seems that over the last 12 months the rise has not been quite so aggressive as it has been previously.

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”.

Average rents are expected to rise by 2.5 per cent in 2013 and 18.2 per cent over the next five years, as forecast by the global real estate service provider Savills.

The amount of rent paid by the under 35s is forecast to rise by 53 per cent from £24 billion to £37 billion over the period, making this a growing and attractive destination for investment. 

But despite the high cost associated with renting and the potential problems with owners and occupiers, the National Landlords Association (NLA) says that relations between tenants and landlords are almost completely positive.

By 2016 demand for private rented accommodation could reach one in five households, Rightmove forecasts. This, they say, will require an additional 1.1million rental homes

Richard Donnell, Director of Research at Hometrack states that “there is however a limit as to how high rents can go as affordability constraints continue to squeeze household budgets”.



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