Business

Rental costs in private sector 'at record', LSL says

  • 17 August 2012
  • From the section Business

The average rent paid by private tenants in England and Wales reached a new record high in July, of £725 a month, a letting group has said.

LSL, which owns the Your Move and Reeds Rains property chains, said average rents rose by 1% last month and were 2.9% higher than a year ago.

This was due to growing numbers unable to get a mortgage, it said.

The number of homes started by builders in England has also fallen again, to the lowest level for three years.

Government figures released on Thursday showed that only 21,540 new homes were started by builders in the three months to June this year.

That was 24% down on the same period a year ago and a 10% drop from the first three months of the year.

The Department for Communities and Local Government (DCLG) said: "Starts are now 54% below their December quarter 2005 peak, but 27% above the trough in the March quarter of 2009."

'Frustrated first-timers'

The dearth of new housing, allied to the rapidly growing population and continued rationing of mortgage funds for first-time buyers, has been a key factor behind the relentless upward trend in the cost of being a tenant.

LSL said rents were rising fastest in London and the South East, with the average rent in the capital now at £1,057 a month.

"The backlog of frustrated first-time buyers in the private rented sector showed no sign of clearing in July - in fact, it is still growing," said David Newnes, of LSL.

"As lending to those without substantial deposits remains depressed, demand for rented accommodation can only go one way in the long-term - providing further upward momentum for rents.

"The rental market is also entering its summer peak, as recent graduates and those with new jobs begin to look for new accommodation," he added.

More renters

With mortgage lenders now typically asking borrowers to put down a 20% or 25% deposit, many would-be home buyers have been in effect locked out of the home-buying market.

As a result, many are still being forced to rent a flat or house when, ideally, they would have bought one in the past few years.

This has led to constant upward pressure on the demand for rented housing at a time when house building has been in the doldrums.

Housing charity Shelter described the rental market as "out of control".

"What many forget is the devastating impact that every rent rise has on families who are forced to cut back further on food and other essentials.

"Many will be wondering how much longer they'll be able to stay in their home."

Figures earlier this year showed that owner occupation had fallen to 66% of all households in England, which was back to the level of 1989.

Meanwhile, the proportion of households renting their homes from private or public-sector landlords had increased, to 34% of households.

The effect of all this has been that the level of owner occupation has been dropping since 2005, after reaching a peak of 70.9% in 2003.

Supply squeeze

Separate figures have reflected how wages have failed to keep up with the cost of buying a home in England.

In 2001, the average price of a house was £121,769 and the average salary was £16,557, according to the National Housing Federation.

A decade on, the typical price of a property is 94% higher at £236,518, while average wages are up 29% to £21,330, the organisation which represents housing associations in England said.

"Ten years ago the average amount that you would have needed for a deposit was about nine months worth of salary. Now you need three years' worth," the federation's chief executive, David Orr told the BBC.

"All of these things are indicators of a market where there's not enough supply. And the simple answer is, we have to build more homes."

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