Rents up Again in November

Rents rose by 4.2% over the year to November 2013 to stand at an average of £862pcm, according to the latest Countrywide monthly lettings index. It found rents are rising most quickly across the South of England (5%) and in Scotland (8.8%).

The largest increases in rents have predominantly been in those regions which have also seen the largest increases in house prices. While Land Registry data shows house prices in London rose 9.3% in the year to November 2013, rents rose 6%. There was a similar story in the South East where strong growth in house prices has taken place alongside strong rental growth.

However, further north rental growth is running at twice the rate of house prices. Increases in house prices across the north remain in the region of 0.8% to 1.2% – well below the 2.2% CPI inflation figure reported in October. Over the same period rents broadly tracked inflation rising 2.1%. As a result the level of arrears has continued to reduce, hitting 6.5% in November 2013, down from 6.9% a year earlier.

Rising house prices over the past 12 months have outstripped increases in rents in six of the nine English regions. Growth in the London sale and rental markets has outpaced the rest of England by a considerable margin, without house prices growing at more than twice the rate of the second fastest growing region. These large increases in house prices remain confined to London and the South East. In Wales and Scotland negative or very limited house price growth has been in the context of stronger growth in the rental market.

Across the North of England tenants are increasingly signing longer tenancy contracts, remaining content to rent for longer periods of time. In Northern England, the average tenancy is now 16 months and three days, up 2% from 15 months and 24 days. Slow or negligible house price growth has meant tenants are content to stay put, with prices rising in many areas more slowly than wages.

Nick Dunning, group commercial director at Countrywide said: “Across the South of England increases in house prices have surpassed strong rental growth as improvements in mortgage finance filter through. However, lending to first time buyers has not been at the expense of the rental market. In London and the South East increasing house prices and rents have tended to go hand in hand, driven by the lure of employment and investment. However, further north it is a different story. While rents have tended to broadly track inflation over the last 12 months, house prices have growth at half the rate – in the region of 1%.

“There are very few signs that this balance will change significantly in the short term. Help to Buy Mortgage Guarantee has and will improve the availability of finance, particularly for lending to homebuyers with smaller deposits and with Funding for Lending being withdrawn in February 2014. However, it will not make borrowing significantly cheaper and therefore it is unlikely to place significant upward pressure on house prices. Income growth is therefore likely to be the key determinant of both increases to house prices and rents. A London and South East led recovery has meant income growth has been significantly stronger across the south rather than the north of the country, which has duly been reflected in house price and rental growth.”