14:51 PM, 27th October 2010, About 12 years ago
Rents have hit a two-year peak as the squeeze on mortgages has dried up funds for first time buyers and home movers.
Rents were up 1.4% or £12 a month on those in July – equalling the last peak of £686 per month last seen in September 2008.
Renting currently costs 2.5% more than at the same time last year on average, with today’s figures following seven consecutive months of price rises, says the survey from LSL Property Services.
The increasing trend of people deciding to rent has been blamed on a combination of factors, including concerns of an impending price crash putting people off buying, worries about job stability, government spending cuts and the limited availability of good mortgage rates.
“All these factors have shifted the power back into the hands of landlords, driving up rents,” said David Brown, Commercial Director of LSL Property Services.
Rent surged highest in the South East and London – by 2.8% and 2% respectively.
In contrast, property owners in the West Midlands and Wales found themselves forced to reduce rent by 1.5% and 1% respectively.
August also heralded a rise in tenant arrears, with arrears totalling £266.3 million, or 11.3% of all rent in the UK. This is up 25% from £212.9m (or 9.2%) in July.
The increase in tenant arrears was largest in the North East, where unpaid rent rose from 10% in July to 14.4% in August – the biggest increase of all the regions.
“Rents have been rising all throughout this year but they haven’t affected tenant arrears until this month,” commented Mr Brown.
“But now arrears are up – in fact they are rocketing in the North East. Tenants everywhere are only going to come under further pressure as the cuts keeps coming, but it’s possible we’ll see a significant north-south divide develop.”
The rise in rents alongside house prices remaining static for three months means that an investor buying property now could expect a total annual return of 9.3%, the equivalent of £15,711.