Rents Curtailed By More Buyer Interest
The cost of renting in England and Wales has stabilized, after a pick-up in activity particularly among first-time buyers. Recent reports indicate that average rents in June at £737 were the same as in May – an increase of only 2.6% year on year.
These have now been stable for some months, demonstrated by the fact that £735 was the equivalent figure from last March. There are however some significant regional differences, with 5 areas seeing increases including the East Midlands at 0.7%. Wales saw the largest decrease with a reduction of 1.9%.
Rents increases over the past year have been driven by a 6.4%rise in London.The East Midlands was the only other region that recorded a year-on-year rise above the national average (see above).
The market is currently much more dynamic than twelve months ago, as higher confidence, stable prices, and low mortgage rates (supported by fierce competition between lenders, driven in part by the Government’s Funding for Lending scheme) have all served to boost buyer interest. In fact, across the UK, many properties new to the market are selling in less than two weeks, where the vendor is motivated and the home competitively priced. There is currently a general shortage of so-called new instructions, and this is encouraging new applicants to make early offers.
Whilst some choose renting as a lifestyle option, the majority of the market is driven by frustrated home buyers who have been struggling to raise the necessary deposit. The current benign conditions are driving the increased demand, but this may not last forever. It is expected that in the medium term, the number of purchasers will be limited by continued restrictions in new homes supply, and also general pressures on disposable income, so that as the UK population grows rents are expected to rise approximately in line with inflation.
The total amount of late or unpaid rent increased slightly in June, rising by £4m since May. Total arrears in June increased to £280m, some8.3% of all rent across England and Wales.
Annual rental cost changes:
London: up 6.4%
East of England: down 0.1%
South-west England: up 0.7%
Yorkshire and the Humber: down 0.4%
North-west England: down 1.1%
Wales: up 1.2%
South-east England: up 1.4%
North-east England: up 2.5%
West Midlands: up 0.7%
East Midlands: up 3.4%
England and Wales: up 2.6%