The latest Office for National Statistics Index of Private Housing Rental Prices shows that private rental prices rose by 2.5% in the year to June.
Data from the report shows that rental costs increased by 2.5% in England, 2.1% in Scotland and 0.8% in Wales in the 12 months period. In England specifically, rents rose across all regions, with the most significant rise recorded in London with 3.8%.
Additionally, consumer price index (CPI) inflation stood at 0% during the same timeframe.
Steve Bolton, founder of Platinum Property Partners stated, ‘last month saw the biggest annual increase in average rents seen since January 2013. A shortage of suitable properties, coupled with strong consumer demand-both from people priced out of the housing market and those who find renting better suits their lifestyle-has set rental prices on an upwards trajectory.’
‘This rise in rents isn’t likely to slow down any time soon, particularly as landlords now face a number of increasing costs,’ Bolton continued. ‘The prospect of an interest rate rise, together with the cap on mortgage interest tax relief introduced in the Budget, could pressure some landlords to increase their rents as they look to regain some of their profits.’
Bolton also said, ‘while growing wage packets mean some tenants will be able to cope with higher rents, landlords should be focusing on revisiting their strategy rather than passing their costs directly on to tenants. The Houses in Multiple Occupation (HMO) model provides up to three times more rental income than a standard buy-to-let investment, providing a sufficient buffer against rising costs.’
Rents rise by 2.5% during past twelve months
Concluding, Mr Bolton said, ‘our recent report showed HMO’s achieved a 40% higher return on equity from 2010-14 compared to the wider buy-to-let market. HMOs are also beneficial for tenants: PPP analysis shows that tenants living in high quality shared accommodation pay £419 less each month in rent and bills than someone who is renting alone.’
Betsy Dillner, director of Generation Rent, added, ‘the Government might cheer zero inflation but it means very little to those of us who see any pay rises end up in our landlords’ pockets. As more people find themselves stuck renting, runaway rents will drag the economy down. Ministers urgently need to ramp up their investment in new homes, and bring in rent controls to lower the cost of living for all.’