Shelter warns of 'gathering storm' as rents in London soar to new high

Published by Jon Land for 24dash.com in Housing and also in Bill Payments

Housing charity Shelter warned of "another cloud in the gathering storm" today as London's private rents hit a record high during June.

According to the latest Buy-to-Let Index from LSL Property Services plc, the average rent in England and Wales rose by 0.9% to £718 during the month, with average rents in the capital soaring to £1,047.

On a monthly basis, rents rose in all regions of England and Wales but one. Wales saw the largest rise, with rents increasing by 2%, followed by the North West and West Midlands where rents rose by 1.7%. But rents dipped in the South West, falling by 0.3%.

London remains the region with the fastest annual rental growth. Rents in the capital have climbed 4% year-on-year, with tenants paying an average of £41 extra per month compared to June 2011. The South East had the second highest rental inflation, with rents climbing 3.6% compared to a year ago. On an annual basis, rents remained in negative territory in just the East Midlands after the North East and Wales returned to growth.

David Newnes, director of LSL Property Services, said: “The sheer weight of tenant demand continues to push up rents across the country.

"Lending criteria remains tight and the number of mortgages given to first-time buyers – especially those without substantial deposits – is still a long way from the level seen before the credit crunch.

"With higher rents and the growing cost of living eroding how much tenants can save towards the large deposits required to buy, it’s no surprise to see the private rented sector swelling by 262,000 households a year.

“But shorter-term factors were also at play in June. The rental market tends to see a flurry of activity at this time of year as tenants look to move before the onset of summer holidays, but this trend has been exacerbated – especially in London – by tenants moving with urgency to secure properties ahead of the disruption of the Olympics.”

Campbell Robb, chief executive of Shelter, said: “For renters, this is yet another cloud in the gathering storm. Rising rents at a time when wages are flatlining mean that many families are reaching crisis point, cutting back on food and other essentials just to make ends meet.

“Renting in this country is the worst of both worlds. Government figures released earlier this month show that on average, renters pay out £75 a month more than those with a mortgage, but it’s frighteningly insecure, with landlords able to evict with just two months notice. Yet with rising numbers of hard-working families locked out of home ownership, there’s no doubt that rental Britain is here to stay.”

Meanwhile, overall rental arrears deteriorated in June, with 9.2% of all rent late or unpaid at the end of the month, an increase from 8.9% in May. In total, unpaid rent in June amounted to £289m, an increase of 5% from £275m late or unpaid in the previous month.

David Newnes added: “While arrears are still down on their 12 month average, rising rents and difficult economic conditions are squeezing tenants’ finances, and a growing number face payment problems.

"With the country in recession, and more public sector cuts on the way, tenant arrears are unlikely to drop in the longer-term, while summer holiday spending may also impact coming months’ figures.

“The monthly rise highlights how crucial it is that landlords strike a balance between securing the best possible rent and ensuring prospective tenants will be able to meet payments in the long-term, rather than leaving the investor at risk of arrears on their property’s mortgage. ”