by Mark Johnston
Rents Fall but for How Long?
Last year saw soaring rents due to high numbers of would be buyers finding themselves trapped in rental accommodation as they were unable to obtain a mortgage.
Research from housing and homelessness charity Shelter found that year on year annual private rents have risen on average by almost £300.
It seems that first time buyers struggled to raise the typical 20 per cent deposit needed to buy a home and this then created more demand in the rental sector.
Many experts have stated that a lack of choice for private tenants has been one of the driving forces behind strong rent increases in recent months.
However, just recently the introduction of the governments ‘funding for lending’ scheme has meant that the number of mortgages on the market has increased by around one third and lenders have also been offering some of their lowest ever rates.
This has therefore enabled many more first time buyers to gain a foothold on the property market.
In turn this has meant that private rents have dropped for the third month in a row in January 2013 as increased mortgage availability has eased some of the pressure in the sector.
David Newnes, director at LSL Property Services, said “an improved mortgage market in January helped take a little pressure off the limited supply of rental properties”.
According to a lettings network rents fell by around 0.3 per cent month on month to reach around £732 per month, these falls appear to take rent amounts back to those seen in July last year.
These falls in rent appears to have come at the same time as the Council of Mortgage Lenders (CML) announced that 216,000 first time buyers became home owners in 2012.
The rent falls do however come as a welcome boost to many tenants finances as the recent rent rises have taken a heavy toll on them, many of which have increasingly fallen behind with their payments.
It is still worth noting though that despite these falls rent rises still outstrip the average pay rise and the burden of this has meant that many tenants have had to cut back on other essentials in order to meet their rent demands.
Current figures have shown that in December 2012 rent arrears rose sharply to £326 million from £241 million in November 2012.
All this said some industry experts have warned that these rent falls could suggest that rents could be about to increase again and the private rental sector is coiled for a possible spring bounce.
Therefore, property experts believe that the dip in competition is not likely to last long as the pace of the fall in monthly rents have already slowed and tenant activity also seems to be picking up pace again.
With this in mind data has revealed that around 74 per cent of professional landlords have already suggested that they intend to expand their portfolios in 2013.
However, Miles Shipside, director of Rightmove the property website, said “overall supply of greater rental property coming on tap is good news for tenants as it is likely to lessen the pace of rental growth in 2013”.
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