Whilst it does appear to have startled journalists, we should not be in any way surprised that rents are creeping up.
Headlines claiming September to September rises of 2.8% are a little sensational on the basis that when London is stripped out, the average year on year increase falls to 1.9%. The Office for National Statistics doesn’t publish average rent levels and much of this type of data comes from the private sector – it is impossible, therefore, to make any assumptions about the real cost of rent rises.
Years of under supply in the housing market have been rounded off by the most severe financial downturn in a generation which brought speculative development to a standstill when in the context of typical property cycle, it should’ve been taking off again. Many would-be-buyers have been prevented from buying, mainly as a result of highly restricted mortgage availability and it is only recently that the age of the average first time buyer started to lower after several years lingering at unsustainable levels.
It is a well-known fact that we Brits would typically prefer to buy rather than rent and the notion that rent is dead money will certainly have had a bearing on the amount of rent which people have been prepared to pay. It is counter-intuitive for the typical UK resident to pay the equivalent proportion of their income on rent as they would have on a mortgage. We believe that this may be softening as a proportion of the current generation of would-be-buyers accept that they may have to rent for slightly longer than they had originally planned to.
Whilst rents may be creeping up, so are earnings and we know from analysis of our own tenant group, that many have historically paid a rent far lower than what they could afford according to their earnings.
Many landlords would argue that rents in most areas outside London have been static for some time and that some growth is well overdue. It remains to be seen what impact the inevitable increases in housing supply will have on rents as the supply and demand curves come closer together.