Monday, July 14, 2014
Average UK rents grow at the fastest rate for a year
· Average UK monthly rents increased 4.6% year-on-year and prospects for future growth in rents look strong.
· Significant upward pressure on rents is partly due to a lack of suitable house building for both sale and rental in London and South East.
· With a 50% increase in mortgage lending to first time buyers and the introduction of Help to Buy scheme, many more tenants have been helped into homeownership over the past 12 months resulting in a 10% fall in tenants aged under 30 signing new rental contracts.
In the first half of 2014 rents grew faster compared to the same period in 2013, partly due to a shortage of new build housing particularly in London, the South East and other major conurbations with sound economic fundamentals, according to analysis of Countrywide Residential Lettings database of over 65,000 rental properties.
There are signs that a degree of pent up demand in the sales market has now been released following a year in which mortgage lending to first time buyers rose 50% and the introduction of the Help to Buy scheme 15 months earlier which has had an impact on rents, as more tenants move out of the rented sector and purchase their own home.
Average UK monthly rents increased 4.6% over the past 12 months, growing at approximately twice the rate of 2013. Unlike 2013, when rents grew most quickly across parts of Northern England, it has been Outer London and the East of England where rental growth has been fastest, two regions which together which have accounted for 40% of all employment creation over the last 12 months. Rents in London continue to be driven by the Capital’s booming population which government figures show increased by 108,000 to 8.4million in 2013.
While rental growth has been outpaced by house price inflation across much of southern England leading to a degree of yield erosion, the low interest rates offered by savings accounts, typically an average of 1.17%, continue to make the total returns associated with buy to let investment attractive against other investment vehicles.
The rental market is however highly seasonal, with rents traditionally growing most quickly over the summer months as contracts are renewed, tenants begin their search for new property and student’s look for next years’ accommodation. This year has been no different.
The 50% increase in mortgage lending to first time buyers over the past 12 months, coupled with the average age of a homebuyer using the Help to Buy Equity Loan scheme being just 29, has led to a fall in the number of younger tenants signing contracts. Younger tenants increasingly sign shorter contracts because they enjoy the flexibility and ability to move at short notice. So far in 2014, tenants aged 30 and under have accounted for 42% of new tenancies signed, down from 52% 12 months ago.
Conversely, those aged 40 and above now form 30% of tenancies, up from 25% a year ago. However, this change is likely to be short term with those keenest to use the Help to Buy scheme having already done so and the fundamental lack of new housing supply means that the barriers to homeownership continue to grow.
Commenting on the findings Nick Dunning, Group Commercial Director, Countrywide plc, said:
“The recovery in mortgage availability, Government Help to Buy scheme and improving sentiment in the housing market has seen a wave of tenants move into home ownership. This flow of tenants out of the sector saw demand for rental properties in many areas ease, resulting in below inflation rental growth in some areas in 2013. With changing conditions in the sales market meaning that many of those tenants looking and able to buy have already made their move, rental growth looks set to accelerate.
“Over the medium to longer term a lack of supply will increasingly put landlords in a stronger position to ask for, and achieve, higher rents. Significant upward pressure on rents will come from a lack of house building, particularly in London, the South East and other major conurbations with sound fundamentals experiencing population growth. Equally, any move by the Bank of England to raise interest rates will serve to push up mortgage costs, making it harder for those with smaller deposits, in particular, to get on the housing ladder. The single best way to alleviate upward pressure on rents is to build more affordable new homes, both for rental and for sale.”
We will process your enquiry as soon as possible.
Thank you for your application, we are currently in the process of screening all applications. Unfortunately if you do not hear from us within 14 days your application has not been successful on this occasion. Thanks for your interest in Countrywide Conveyancing Services.
Please note for all our roles, successful candidates will be subject to the following checks:
There seemed to be an error processing your enquiry, please try again later.