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Categorized | Property

UK rents rise at fastest rate in 2 years


Posted on July 31, 2015

Magnolia buds sit on a tree opposite a row of coloured terraced houses in the Notting Hill district of Kensington and Chelsea in London, U.K., on Wednesday, April 1, 2015. Home prices in central London's wealthiest districts fell for a second quarter as buyers were deterred by higher taxes and uncertainty surrounding the U.K. general election on May 7. Photographer: Matthew Lloyd/Bloomberg©Bloomberg

The cost of renting a home is rising at the fastest rate for more than two years as Britain’s chronic housebuilding shortage pushes living costs up.

Private rents rose 2.5 per cent in the year to June, figures from the Office for National Statistics show — with rents in London up 3.8 per cent year on year.

    By contrast, rents in Wales grew at just 0.8 per cent, while rents in the north-east and north-west of England rose just 0.5 per cent.

    But even these small increases are ahead of the rate of inflation — the official consumer price index measure was zero during the same period.

    Rents are rising at a slower rate than property values, however: house prices across the UK rose 5.7 per cent in the year to May, separate figures from the ONS showed recently.

    Rents have been on an upward trajectory for more than four years. Since January 2011 — the start of the ONS’s data series — rents across Britain have increased 10.2 per cent, the figures show.

    A charity that works with people facing financial problems warned that the rising cost of rent was “a real concern”.

    Jane Tully, head of insight and engagement at the Money Advice Trust, which runs the National Debtline, said she fears that “rent arrears will continue to increase”.

    The National Debtline has seen the proportion of its clients who need help to deal with rent arrears double since the credit crunch, to nearly 13 per cent.

    “With interest rate rises possibly only a few months away, we expect to see additional pressure on private renters’ budgets as landlords pass on these extra costs to their tenants,” Ms Tully said. She urged renters to “review their household finances”.

    Steve Belton, founder of property investment adviser Platinum Property Partners, said that rents were being pushed up by “a shortage of suitable properties coupled with strong consumer demand”.

    In depth

    UK housing market

    For sale signs uk

    Price indices have presented wildly contrasting pictures of the health of the housing market – according to some the boom is back, while to others the slump staggers on

    Further reading

    Chancellor George Osborne’s recent crackdown on buy-to-let investors is likely to push renting costs up further as landlords seek to recoup the additional costs from their tenants, Mr Belton added.

    “This rise in rents isn’t likely to slow down any time soon,” he said.

    Tax relief on buy-to-let mortgage interest will be restricted to only cover the basic rate of income tax, Mr Osborne said in his Summer Budget. The relief for higher-rate taxpayers will be withdrawn gradually over a four-year period from 2017.

    Tax relief on the cost of maintaining a property’s furnishings will also be tightened, saving the Treasury £200m a year.

    At the time they were announced, Mr Osborne said the changes would create “a more level playing field” between landlords and homeowners.

    The ONS’s rental series is an experimental statistic — one that carries less weight than its collection of official data, which includes its house price index. Its methodology is still under evaluation and may change.