Rents at all-time high
The cost of renting a home has diverged from negative inflation as annual rent rises accelerate to 6.3%, according to Your Move and Reeds Rains’ Buy-to-Let Index.
Rents rose by 1.6 per cent between August and September alone in contrast to consumer prices which are now 0.1 per cent lower than in September 2014, according to the Office for National Statistics.
On a cumulative basis the difference with inflation is starker. Rents are now almost a quarter (24.4%) higher than in January 2010, while the index of CPI inflation is just 14.1 per cent higher over the same period. This means rents have risen by 10.3 per cent in real terms since the start of the decade.
Adrian Gill, director of estate agents Reeds Rains and Your Move, said: “Rents are rising strongly in real terms due to the recent acceleration in wages, and the much deeper and longer-term shortage of available properties across the UK – of all tenures.
“Meanwhile, as the price of everyday essentials plateaus and even falls, rents are no longer following the same broad trends. The cost of a place to live has now uncoupled from the cost of living. As long as this supply and demand imbalance keeps up, it is hard to see any reversal in the speed of rent rises.
“In many ways housing is more essential than other expenses, so this also raises important questions about the nature of inflation. In this case, reform of the UK housing market and planning system is the only serious way to maintain steadier rental inflation.”
Five out of 10 regions of England and Wales have also witnessed individual rent records in September. Rents in London have risen most rapidly, up 11.6 per cent on an annual basis to a new record of £1,301 per month. The annual change in London has also overtaken the East of England, where rents are now rising marginally more slowly, yet are still up 8.8 per cent over the past 12 months.
Record rents in the East Midlands are now 6.7 per cent higher than 12 months ago, at £603 per month, while the West Midlands has seen its own record of £592 per month, or 5.2 per cent higher than in September 2014.
Meanwhile, South Western rents have risen at a comparable annual rate of 5.5 per cent to stand at a fresh local record of £691 per month. The final region to see a local record, rents in the South East now average £831 per month, but have risen more slowly, by 3.6 per cent since September 2014.
“We are in the middle of the busiest time of year in the rental market. September and October are especially important given the student rental market in the autumn and the echoes of the academic year as those in their twenties start new jobs,” said Gill, “When rents hit a fresh record, it is more likely to happen at this time of year. Yet in 2015 that seasonal trend has been blown out of the water by an unprecedented acceleration.”