A senior financial analyst says “runaway rents” are destroying the financial resilience of tenants.
Sarah Coles, head of personal finance at business consultancy Hargreaves Lansdown, is responding to government figures showing that 51 per cent of tenanted properties surveyed had seen a rent increase in the year to February. In London this was 67 per cent, in the South East 62 per cent and in the South West 53 per cent.
Among those with rising rents, the average hike was 10 per cent - up from seven per cent a year earlier.
Coles says: “Runaway rents are crushing the finances of those trapped in increasingly expensive homes. More than half of tenants have seen their rents hiked in the past year, and on average they’re up 10 per cent. It’s no wonder that they face such huge challenges to make ends meet – let alone get onto the property ladder.
“The figures in London are particularly painful, with more than two thirds of rents hiked an average of 12 per cent. Given that private renting is far more common in London – at 29 per cent compared to an average of 19 per cent - the impact is felt even more widely.
“Runaway rents hit hard, because while [the government’s] Family Resources Survey showed that the average rent is the same as the average mortgage – at £150 a week – it makes up a much higher proportion of the income of renters, because they tend to be on lower wages.”
Coles continues: “And it’s not just your day-to-day finances taking a hit, because renters are spending so much keeping the wolf from the door that they’re struggling to put anything aside to help them onto the property ladder. It’s why the Family Resources Survey showed people are renting for longer.
“Within every age category, the proportion in the private rental sector is up over a decade – with the proportion of those aged 35 to 44 who are renting rising from 19 to 26 per cent.”
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Rents up 10% and inflation at 11.1%, so that's not an increase in REAL terms.
Real inflation is higher (as the essentials in the inflation basket, like energy, have risen dramatically but the non essential items haven't)
And wages haven't risen near published inflation either
H R all the self employed tradesmen I know have increased their hourly rated by inflation as have solicitors and accountants, even the workshy scroungers on UC have now had a full inflation increase, and wages are increasing as the strikers return to work
Mortgage interest rates for BTL mortgages up from 1.99% to 4.99%. Isn't that a 150% increase?
Tradespersons day rate up from £160 a day to £220 a day. Isn't that a 37% increase?
All of our costs have increased.
We can only increase rent once a year.
Even the subsidized Social Housing is increasing rent by 7% this year.
However, Minimum wage has increased. Some employers have just announced the 4th pay rise in a year. Other wages have risen significantly.
So effectively even if we increase rents by 10% we are one of the only sectors that will experience a genuine pay cut. Our costs are up by way more than 10% and we are taxed on turnover not profit. So the government get the first 40% or 60% of any extra rent we charge the tenants before we can put the remaining increase towards our massively increased mortgage costs.
Bad luck, this is what an investment looks like. It has risk, I presume you read the small print?!
All business carries risk, but risk has to be priced into the end product or service provided, hence '' runaway'' rents
Don't blame Landlords, the blame firmly rests with the Government. They are the ones whom need to do a re-think. As Landlords leave then the issue will just get worse.
And then it will get better. The medicine is often unpleasant but it cures the ailment. Sometimes it can take a while to act
But will it get better H R ?
Ooops properties to let (especially in London) are becoming as rare as rocking horse droppings so the sxxt has started to hit the fan because those wicked property owners are unwilling to continue letting their properties with the pending Tsunami of legislation culminating with section 21 guarantee of being able to regain vacant possession when needed outlawed.
This must be a localised phenomena.. Ukrainian who was staying with me found a place to rent near tooting within about 3 days of getting a job on London
Your Ukrainian is a very lucky chap then, good for him/her
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