Rental increases continue to outpace inflation
Paying out rent while trying to save for a deposit on a home? New ONS figures show times are getting even tougher.
What’s the latest?
The cost of being a tenant is rising at nearly NINE times the rate of inflation.
Private sector rents increased by 2.6% in the year to the end of April, compared with inflation, as measured by the Consumer Prices Index, of just 0.3%, according to the Office for National Statistics.
April was the fourth consecutive month that private sector rents have increased at an annual rate of 2.6%.
Why is this happening?
The UK is failing to build enough new homes to keep pace with growing demand.
While the housing shortage has a bigger impact on the cost of buying a property, with house prices rising by 9% in the 12 months to the end of March – the latest period for which figures are available – it also drives rents higher.
At the same time, the Government has made a number of changes that make it more expensive to be a landlord, and some of these costs are being passed on to tenants.
Who does it affect?
The fact that rents are rising significantly faster than inflation is bad news for potential first-time buyers, as it means they will have less money each month to put towards a deposit for a place of their own.
As much of the increase is being driven by supply failing to keep pace with demand, tenants not only face higher costs, but they are also likely to have less choice too.
But the increase is good news for landlords, who have seen their own costs increase in recent months.
Sounds interesting. What’s the background?
As is the case with house price increases, rent hikes have been steepest in the southern regions of England, where demand is greatest. London led the way, with rents in the capital rising by 3.7% during the year, followed by the south east at 3.1% and the east of England at 3%.
The cost of being a tenant in London has been rising faster than in other regions since November 2010.
But at the other end of the scale, rents in Wales edged ahead by just 0.2% during the 12 months, and in Scotland they were just 0.5% higher.
Rental increases were also lower in northern regions of England, increasing by 0.8% in the North East and by 1.1% and 1.3% in the North West and Yorkshire and the Humber respectively.
Paul Smith, chief executive of haart estate agents, said: “While the number of properties available to rent surged following a rush from buy-to-let investors in advance of the Stamp Duty changes on April 1, we are now seeing a decline in stock as investors withdraw from the market.
“Ironically, the Government’s efforts to help first-time buyers by penalising investors, could end up hindering them as a shortage of rental properties will drive up rents in the long term, making it more difficult to save up for a deposit.”
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