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Rents grow faster than house prices

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Rents have increased more than house prices in the last 12 months, market data has shown.

Figures compiled by estate agency chains Your Move and Reeds Rains found annual rents were 5.6% higher in June than a year ago.

A typical rented property now costs £789 each month, compared to £778 a month ago.

This is a faster rate of growth than house prices, the first time this has been achieved in two years.

For landlords, these rises helped keep the typical yield on a property at 5.1%. Annual returns remained steady at 9.2% in the year to June, fractionally down on previous months.

This means that the average landlord in England and Wales has seen a return of £16,216 in absolute terms during the last 12 months, before deductions such as mortgage payments and maintenance.

Increasing house prices meant the average capital gain contributed £7,946 of this figure while rental income accounted for £8,270.

However, increasing rents have also caused a rise in the number of tenants in financial difficulty. Arrears made up 8.7% of all rent payable in June 2015, up from to 7.6% in May.

Adrian Gill, director of estate agents Reeds Rains and Your Move, said: “The pedal is pressed to the metal in the rental market.  Not only have rents hit a new all-time record high – but we have never seen them rise so quickly.

“With such an overall shortage of housing in the UK, rental costs are primarily driven by the amount tenants are capable of paying. Rents have also decoupled from inflation. While record low inflation fuelled by falling oil prices might bring clothes or food within the range of tenants’ purchasing power, it doesn’t have much of an effect on the property market in the short term.

“In all this, we mustn’t lose sight of the driving force behind rent increases – the mismatch of supply and demand. Expanding our housing stock needs to become a national priority. If anything, competition for homes is only going to get more intense over time. The fierceness of housing competition needs to be met with an equal dedication to homebuilding.”

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