Housing Market: Rental Costs Near Record
The effect of rising house prices on the rental market is laid bare today as a report suggests private rents are just £1 short of record highs.
The lettings network LSL Property Services said rents had reached their second highest level since 2008 - largely because of a shortage of property to buy as Government schemes help people onto the ladder.
LSL, which owns the Your Move and Reeds Rains chains, reported that at £743 on average, monthly rents in August were just £1 less than the all-time high recorded in October 2012.
The pace of rent increases stepped up to 0.7% month-on-month in August.
It said rents were 1.3% higher across England and Wales than a year ago - less than half the rate of inflation - but London's rental market was soaring.
At £1,126 typically, rents in the capital have risen at a much faster rate than inflation and are up by 4.8% year-on-year.
Earlier this week, official figures showed that house prices in London were up by nearly 10% year-on-year, indicating the strength of demand.
Wales saw the second biggest annual increase in rents, with a 2.3% uplift taking average rents to £561.
The South East recorded the strongest month-on-month growth, with a 2% rise pushing monthly rents to £762.
By contrast, rents in Yorkshire and the Humber are 1.6% lower than last year, at £536 typically, followed closely by a 1.5% annual fall in the North West, taking average rents to £582.
The North East saw the biggest month-on-month drop in rents, with a 0.8% fall taking average rents to £523.
Across the country, rental inflation had been cooling off for much of this year following the launch of Government schemes to give people with low deposits a chance to buy.
First-time buyer numbers have reached their highest levels in more than five years following the initiatives such as Funding for Lending and Help to Buy, which have widened access to mortgages and allowed some people who were previously trapped in renting to break free.
But David Newnes, director of LSL Property Services, said that weak income growth, which has an impact on households' ability to borrow, and a lack of housing supply meant that the private rental sector was continuing to see strong demand from new tenants.
Mr Newnes said: "Better availability of finance has allowed some households to leave the rental market. And rents certainly felt the short-term impact of that.
"But releasing a blast of pent-up pressure to buy a home is unlikely to change the long-term trend in renting.
"Although Government schemes are helping, buying a first home is still extremely hard on the back of low salary growth."