The UK rental market has exploded into a ferocious boom. Whereas price growth has been limited to London in the last few months, the rental boom is happening countrywide, as a unique and incredibly ironic set of circumstances now sees the buy to let sector recently revered as the cause of the banks inability to lend, turned into the banks best friend. A friend that you fall over yourself to lend to is very rare indeed.
And it is lending that is one of the very circumstances behind the boom. When the UK housing market finally broke into depression in 2007/08 it kick-started a wave of repossessions across the country, and at the same time crippled banks' ability and/or willingness to lend for house purchases.
You have the thousands of repossessed people who are unable to borrow for obvious reasons, combined with the thousands of would-be first time buyers unable to borrow because of the state of the banking sector, all piling onto the constant demand for rented accommodation to create the boom we see today.
According to the latest buy to let index from LSL Property Services (parent of Your Move and Reeds Rains agency network) from data based on a representative sample of 18,000 properties across the UK, the average rent in England and Wales rose by 0.7% to £718 per month, surpassing the previous record high of £713 in August 2011.
"With annual rental inflation at 4.3%, the average rent is now £29 per calendar month higher than September 2010. The average yield in September rose from 5.2% to 5.3%," the company told OPP this week.
"Record rental highs are now being experienced in London, the South-East, Yorkshire and the Humber, the East of England, Wales and the East Midlands."
The reasons why this boom would be countrywide and not limited to London are simple and obvious. The whole country was affected by the crisis, the whole country suffered repossessions, and first time buyers across the country face the same barriers to lending, not to mention the remaining economic problem which is suppressing the numbers of would-be buyers anyway. With this in mind, one would wonder why, when the economy seems to be doing better in London than the north, why the rental boom is stronger in London?
This is because of prices. In the north first time buyers could afford to buy a house comfortably but are hampered because they either can't get a mortgage due to their credit rating (banks demand practically immaculate credit at the moment) or can't raise the necessary deposit. In London, many first time buyers are hampered by the same things, and many more who can raise the deposit, and could get a mortgage, simply can't afford to buy at current pricing levels -- while prices have fallen and stagnated in the north, London has seen prices grow consistently since mid-2009.
- Wednesday 09 November 2011