Rents set to rise faster than house prices

Tenants are set to see rents spiral quicker than their incomes and faster than property price growth, according to a concerning new report.

The study from the Royal Institution of Chartered Surveyors (RICS) suggests that while house prices are likely to rise, rents look set to outstrip them.

Rent rises, tenant concerns

People currently residing in privately rented accommodation are thought to bear the brunt of the tax increases for buy-to-let landlords. The fear is that this will lead to a reduction of properties on the rental market, that will in turn push rents higher.

RICS forecast that rents in Britain will rise by an average of 4.7% year-on-year for the next five years. This is in comparison to house prices, which are predicted to increase by 4.1%.

However, the RICS survey is not the only investigation pointing at bad news for renters. The most recent HomeLet Rental Index shows that cost of a new tenancy in the private markets in Britain, increased by 4.4% in the three months to May. This was with the exception of Greater London.

Increases

Rental price growth in Britain was led by Scotland, where rents increased by 10.6% year-on-year. This was followed by rises of 8.3% in the East Midlands. London saw a rise of 6.2%, with rent for new tenancies standing at £1,563.

Martin Totty, chief executive of Barbon Insurance Group, HomeLet’s parent company, observed, ‘the May HomeLet Rental Index continues to show a rental market characterised by steady growth in rents, as the number of tenants looking for property runs ahead of the supply in the market-that remains the picture in most regions of the country.’[1]

[1] https://www.landlordtoday.co.uk/breaking-news/2016/6/rent-price-increases-set-to-outstrip-house-price-growth