The latest HomeLet Rental Index has revealed that average rents across the UK fell in October compared to the previous month, although this was not the case for every region. Tenants in East Anglia and Wales were the only ones to experience a monthly rise in the cost of renting a property, with prices climbing 1.06 per cent and 3.39 per cent respectively. Despite a monthly drop in rents elsewhere in the country, the majority of regions still recorded an annual rise in the amount paid out by tenants.
Scotland, Yorkshire and Humber and the north-east were the exceptions to this rule, with annual slides in rental costs of 2.5 per cent, 0.71 per cent and 0.19 per cent respectively. However, HomeLet director John Boyle pointed out that this is likely to represent a "seasonal dip", which is not uncommon at this time of the year. "If rents follow historic trends, many areas of the UK will see only marginal changes in rental values until July 2012," he predicted. Despite recording an almost four per cent drop in rents during October compared to September, the London market still remains well ahead of much of the UK.
The average cost of letting a property in the capital now stands at GBP 1,206 per month - 8.83 per cent higher than a year earlier. Mr Boyle suggested that rental increases in the city may finally be showing signs of abating. Meanwhile, the HomeLet data revealed that London has the highest rate of sharing among tenants, with an average of two people living together in rented accommodation in the city, compared to the national average of 1.7 tenants per property. Mr Boyle commented: "In areas of higher demand, such as central London, many tenants are sharing with more people, and for a longer period of time, because it's much more cost effective. But, even with more people sharing in the capital, tenants are still spending a higher percentage of their income on rent, when compared to 2010."
The average age of those living in the private rented sector (PRS) increased during October, compared to September, the report revealed, with Mr Boyle noting that these figures only underline the increasing importance the PRS is playing in the UK's housing sector. In its forecast for the rental sector over the coming five years, Savills predicted that rents will rise much faster than house prices until 2016. This will be driven by the demand from those who cannot afford to step on to the property ladder, as well as people who are reluctant to take on such a large financial commitment in the current market.
Across the country, Savills anticipates that the cost of renting will increase by 20.5 per cent over the next five years, while the value of properties is expected to climb by just six per cent in the same period. Director of residential research at the firm Yolande Barnes stated that the organisation has been in favour of investment in the PRS for some time, but noted that this was primarily based on robust forecasts for capital growth. She noted "there is now a strong case on the basis of income". Ms Barnes added that the rising demand for rental accommodation is unlikely to die off while a lack of mortgage finance and unachievable deposits for first-time buyers are still the norm.
The Jones Lang LaSalle 2012 Residential Market Forecast released this month supports these assertions. Residential research director at the firm Jon Neale explained that the number of renters in the UK is only going to rise in the coming years. "The country is becoming increasingly polarised between older, equity-rich owners and younger, renting households who are unable to get a foot on the property ladder," he stated. Mr Neale pointed out that between 2007 and 2010 an extra 664,000 households joined the PRS, while the number of property owners fell by 208,000. A lack of new housing developments is also hampering supply, which is likely to push rents higher in the short term, he added. Mr Neale concluded that the growth of the rental sector and a restricted mortgage market will result in fewer real estate transactions taking place over the coming years.
- Tuesday 29 November 2011