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Average rents to keep rising

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Rents and rental yields in England and Wales will keep increasing, but with big regional differences.
Average rents to keep rising

Average rents will rise to £800 a month by the middle of 2015, according to LSL Property Services. However, the average figures masks significant regional variations, which already exist and are likely to become more pronounced.

LSL reveals that the average rent in London has risen by 18% since 2010, while rents in the South West have not changed at all in that time, for example.

LSL operations director Lucy Jones said:

“Rents in London are already 109% higher than in the North East. Over the next two years, London will see rents rise by 16%. Meanwhile, the East Midlands will see rises of around 8% – and rents in the South West look likely to pick up by only around 1% by 2015, or less than half a percentage point a year.

“The sheer scale of variation across the country is always something to behold – partly because that variation is becoming more pronounced. What is clear is that there has been a significant upheaval since 2008 in the rental market. And this has had a very real effect across the whole of England and Wales. But as a whole landlords have kept up with demand – increasing supply by around 10% since 2008.”

LSL forecasts that house prices will keep rising and that more and more people will look to renting property as a long-term choice – and that this is not necessarily a bad thing. It predicts that, as a result of schemes such as the government’s Help to Buy plan, average UK property prices are likely to increase by 3% a year between now and the end of the decade, and owner-occupation will continue to decline.

Jones said: We think owning our homes means security. Mostly that’s just not true. In Germany, less than half the population owns their own home, yet it is generally accepted as the most prosperous Eurozone country.

“In the UK that stat is sixty-four percent home-owners. It’s a statistic that – alone – gives away nothing about our quality of life or prospects for economic growth.”

LSL points out that the private rental sector will become increasingly important in the UK, with buy-to-let landlords playing a pivotal role.

Jones added: “Landlords will be critical in providing more homes for million of people who are no longer able to buy. Not just rents will rise. Gross yields are set to increase, too, and that should encourage investment from landlords – but they will need finance to continue to keep pace with such demand.

“More finance can allow more homes, and that’s slowly happening. Buy-to-let advances are growing gradually, at what should prove a sustainable rate. And long may that continue. This year, buy-to-let looks set to return to the same proportion of mortgage lending as it was in 2007.

“The private rented sector is set to flourish in the recovery, if anything more vigorously than its performance in the recession.”

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