Rents have reached a new record high in England and Wales with the average rent paid by private tenants now at £725 a month.
Letting group LSL said that average rents increased by one per cent in July and have risen by 2.9 per cent over the past year. The previous record high was £720 a month, the level reached in October 2011.
LSL said that the main reason for the increase in rental costs was that many tenants are unable to get a mortgage.
The Funding for Lending scheme has helped to bring down the cost of some mortgages but these have mainly been for people who have already been on the property ladder for some time and have large amounts of equity and qualify for the better deals.
David Newnes, of LSL Property Services said: “The backlog of frustrated first-time buyers in the private rented sector showed no sign of clearing in July – in fact, it is still growing.”
“As lending to those without substantial deposits remains depressed, demand for rented accommodation can only go one way in the long-term – providing further upwards momentum for rents.”
Another factor is the lack of activity in the construction sector, where the number of new homes being built has fallen to its lowest level for three years. Just 21,540 new homes were built in the three months to June, a 24 per cent drop on the same period last year.
This combination of a lack of affordable new homes, the need for a high deposit and a growth in the population has led to rents reaching a record level as a huge number of tenants are unable to get their foot on the property ladder.
This has led to a constant level of strong demand for rental properties as many individuals and couples who would have previously bought a home are continuing to rent. Figures published earlier this year revealed that the level of owner occupation had fallen to 66 per cent, back to the level seen in 1989 and from a peak of 71 per cent in 2003.
Recent figures published by the National Housing Federation reveals how property has become more expensive to own. In 2001, the average home was worth £121,769 and the average salary was £16,557. This gives a ratio of a home costing 7.3 times the average annual salary. By 2011, the average home was valued at £236,518 and the average salary was £21,330, the ratio rising to 11.1 times the average annual salary.
LSL said that rents are rising fastest in London and the South East. The average rent in London is now £1,057 a month, up one per cent from last month. Rental costs rose by 2.2 per cent in the South East to reach £746.
Rents rose in eight out of the ten regions, with just the south-west and the east of England seeing drops in the cost of renting.