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Rising Rent Bills 'To Ease Only Slightly'

(c) Sky News 2012

There is no end in sight to soaring rents following a year that has seen housing tenants pay an extra 4% on average.

The Royal Institution of Chartered Surveyors (RICS) has calculated that after a 4.3% increase over the past 12 months, renters can expect bills to rise by a further 3.9%.

It blames a "scarcity" of mortgage finance and a shortage of good-quality properties for tenants to move into.

The latest residential lettings survey for the second quarter of this year found that in the three months to July, the amount of new properties coming on to the market was little changed but demand among tenants continued to grow.

The study also uncovered strong regional variations with the North West seeing rents increase by the biggest margin of 6.9%.

Surveyors in Wales reported that rents had remained at the same level over the past 12 months.

Peter Bolton King, RICS global residential director, said: "While tenant interest is still riding high, what remains to be seen is whether many are willing to meet the increasing rents being demanded by landlords.

"However, it is clear that we have seen rents grow steadily right across the UK for some time. This is partly down to the problem of the scarcity of mortgage finance and the large deposits required by lenders.

"These barriers to home ownership need to be addressed alongside the shortage of new stock coming to the market."

Rents have soared in recent months as would-be buyers have remained trapped in the rental sector because they cannot raise a deposit or meet lenders' toughening mortgage criteria.

Suggestions have also been made that many people are choosing to rent because of uncertainty surrounding the housing market.

The Council of Mortgage Lenders said on Thursday that buy-to-let lending had increased by nearly a fifth in the space of a year amid strong growth in the rental sector, although volumes remain at about a third of their peak in 2007.

:: A separate report has found home buyers are still likely to make decent returns on their investment in the longer term, despite the weakness of the current market.

PriceWaterhouseCoopers projects that house price growth will average 2% a year in real terms between 2012 and 2025, with a lack of available homes pushing up prices later in the decade.

The rate would give a more modest return than the growth seen over the last 30 years, with increases of around 4% a year between 1984 and 2007.