First-time tenants are struggling to get on to the rental ladder, and are routinely having to go to the Bank of Mum and Dad for their deposits, as rents rose for the sixth month in a row in July.
The new record-breaking high in rents has been recorded in the latest buy-to-let index from LSL Property Services, which owns chains Your Move and Reeds Rains and analyses over 18,000 properties on their books.
It found that in July the average rent in England and Wales rose by 0.6% to £705 per month, surpassing the previous high of £701 in June.
With annual inflation at 4.2%, the average rent is now £29 pcm higher than July 2010. The average yield reached 5.2% in July, up from 4.8% a year ago.
The greatest annual rent increases are in London. In July, rents hit £1,009 per month – an annual increase of 7.1%. The next biggest rises were in the North-East where rents increased by 5.5%, and the East and West Midlands, where rents rose by 4.8%.
In the last year, average rents have risen in all regions except Wales, where they are unchanged from July 2010.
On a monthly basis, rents increased fastest in the South-East, where they rose 1.7%. In Wales and the East Midlands, they increased by 1.4% compared to June. Rents declined in three regions – the West Midlands, where they fell by 0.6%, Yorkshire & the Humber and the North-West, where rents fell by 0.2% and 0.1% respectively.
David Brown, commercial director of LSL, said: “Rents are on an upward trajectory, and it is unlikely that tenants will gain respite any time soon. Demand from thousands of frustrated buyers each month is underpinning buoyant competition for rental homes, enabling landlords to increase prices.
“Such strong demand and high rental incomes has forced lenders to take notice, and more are returning to the sector. As a result of the competition in the buy-to-let market, the range of affordable products is expanding – and lending to investors rose by 21% in the last quarter.
“Nevertheless, even with the squeeze on landlord finance abating, the new supply will not be enough to meet demand from tenants.
“The increasing cost of rental accommodation – alongside the soaring cost of living – is eroding first-time buyers’ ability to save deposits. But first-time renters are also keenly feeling the pinch. As rents climb, so does the size of the average deposit a new renter must find.
“Thousands of new buyers each year rely on the bank of Mum and Dad to help fund a deposit. However, now it is becoming increasingly commonplace for renters to get parental help to fund their first deposit on a rental home, with the typical one month deposit on a property in London more than £1,000.”
Despite the rent rises, tenant arrears decreased for a third consecutive month, with 9% of all UK rent unpaid or late by the end of July – down from the 9.3% in June. Unpaid rent totalled £251m across the UK in July, down 2.4% from the £257m unpaid in the previous month.
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