Figures show slowdown in rent rises

rental property

Rent rises slowed their pace in May as more tenants found it easier to make the jump onto the property ladder, a lettings network has found.

Private sector rents rose by 0.1% month-on-month to reach £737 on average, edging down from a 0.3% increase typically seen over the last 12 months, according to LSL Property Services which owns chains Your Move and Reeds Rains.
The slowdown was accompanied by an improvement in tenants' finances, with 8.2% of rents across England and Wales late or unpaid at the end of the month, falling back from 8.4% in April. But average rents in May were still the third highest that LSL has on its records, which go back more than five years.

Rents were 3.5% higher than they were a year ago across England and Wales, with London and Wales seeing the strongest annual rises at 7.2% and 5.2% respectively. The South West and the North West were the only regions where rents remained static year-on-year and they rose annually in every other region.
Rents have been rocketing due to strong demand in the sector from would-be home buyers who have struggled to get access to a mortgage. There have been signs of the pressure on the sector easing in recent months, amid Government schemes to kick-start the housing market, such as Funding for Lending, which has resulted in a mortgage price war and wider mortgage availability.

The Government's NewBuy and Help to Buy initiatives have also been introduced to help people with smaller deposits. Help to Buy will be fully launched from next year. On Thursday, the Council of Mortgage Lenders (CML) reported that May was the best month it has seen for mortgage lending since 2008. Amid signs that lenders are becoming more willing to hand out low-deposit mortgages, first-time buyers have been consistently making up around two-fifths of lending to home buyers in recent months.

David Newnes, director of LSL, said: "Demand (in the rental sector) would have been even stronger had it not been for a recent spurt in the number of first-time buyers. Looking further ahead, sustaining the increase in new buyers will depend on how many tenants are able to build big enough deposits to get a mortgage."

Mr Newnes said that demand for rented homes will remain "high" because sluggish wage growth and high living costs will continue to drag down tenants' ability to save for a deposit to buy a house.

Consumer Prices Index (CPI) inflation jumped to 2.7% in May and the squeeze on household budgets is expected to continue in the coming months, with inflation predicted to hit a summer peak of around 3%. In another blow for people trying to get on the property ladder, property search website Rightmove recently reported that house sellers' average asking prices have broken through the quarter of a million pounds barrier for the first time.

And a recent report from Halifax, titled Generation Rent, found that despite the Government's initiatives, first-time buyers still needed to find a deposit of nearly £27,000 typically in the first quarter of this year. The LSL study is based on rents achieved on 18,000 properties across England and Wales.

© 2013 Press Association
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