PRS Rents Increase 2.5% In The Past Year
According to the Office for National Statistics (ONS) latest Index of Private Housing Rental Prices, tenants in the UK’s private rental sector (PRS) have seen rents increase by an average of 2.5% in the 12 months up to June 2015,.
Private rental prices increased across the whole of the British isles with rents increasing by:
- 5% in England
- 1% in Scotland
- 8% in Wales
PRS rents increased across all English regions during the year with rental prices increasing by 3.8% in London, while the overall Consumer Price Index (CPI) inflation stood at 0% over the same period.The biggest annual increase in average PRS rents since January 2013 was recorded in May 2015, credited to a shortage of suitable properties available for tenants to rent.
Strong tenant demand for rental property from people generally priced out of the housing market and those who find renting suits their lifestyle has resulted in PRS rental prices remaining on an upward trajectory.
The rise in PRS rents isn’t likely to slow down any time soon, particularly as landlords now face a number of increasing costs.
The prospect of an interest rate rise, together with the cap on mortgage interest tax relief introduced in the Chancellor’s post election Budget, could see many landlords pressured into increasing rents as they look to retain some profit.
Tenants need wages to increase in line with inflation in order to be able to cope with higher PRS rents and landlords may have to refocus their property investment strategies rather than being forced to pass their increased costs directly on to their tenants.
Betsy Dillner, director of Generation Rent, said: “The government might cheer zero inflation but it means very little to those of us who see any pay rises end up in our landlords’ pockets. As more people find themselves stuck renting, runaway rents will drag the economy down. Ministers urgently need to ramp up their investment in new homes, and bring in rent controls to lower the cost of living for all.”
Property investors and portfolio landlords should consider Houses in Multiple Occupation (HMO’s) in order to provide more rental income than a standard single let property investment purchased using a buy-to-let mortgage. HMO’s provide landlords with an increased income from a single property investment that can provide them with enough rental income to act as a sufficient buffer against rising costs.
HMO’s are also beneficial for tenants: as tenants living in high quality shared accommodation pay an average of £419 (GBP) less each month in rent and bills than someone who is renting alone.
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