Rents rise for fifth month in a row to new record high

Rental costs for tenants have increased for the fifth consecutive month to reach yet another record high, according to the latest data for August from LSL Property Services.

The firm says the average tenant now pays £734 in rent as demand continues to outstrip supply.

Average rents increased by 2.9 per cent year-on-year, breaching July’s record of £725 a month.

LSL says that specific influences on the continued rise this month were the seasonal impact of lost of graduates starting new jobs as well as the long-running trend of many would-be first-time-buyers who are still struggling to raise the necessary deposit to get their first mortgage.

David Newnes, director of LSL Property Services, said: "The rental market is right in the thick of its peak season and the demand from graduates and those starting new jobs has added a new layer of competition on top of the existing pool of frustrated buyers.

It is hoped that the government backed Bank of England Funding for Lending Scheme (FLS) will go some way to help potential homeowners get on the property ladder through the availability of cheaper mortgages that require a smaller deposit.

Shelter chief executive Campbell Robb said: "At a time when wages are stagnating, this latest rise in rents is another blow to the millions of people priced out of a home of their own and left at the mercy of an overheated rental market.

"Many of these people will be struggling to keep a roof over their head, let alone save enough for a deposit on a home of their own."

On the FLS, Mr Newnes, from LSL said: "Some relief for tenants may be found if the funding for lending scheme begins to feed through into greater lending to borrowers with smaller deposits.

"But any improvement to the first-time buyer mortgage market will need to be significant and sustained to dent rental demand markedly in the long-term."

The FLS is still in its infancy and it is too early to assess what its impact will be, but so far the better new deals have been reserved for homeowners with plenty of equity.

Mr Newnes confirmed that rents reached new record highs in five regions in England and Wales, with new peaks reached in London, the South East, the North West, East England and Yorkshire and the Humber.

He said: "London and the South East may be the powerhouses of the national rental market but rent rises haven't been limited to these areas by any means.

"In fact, rents have hit record highs in five regions as tight mortgage finance criteria and large deposit requirements for new buyers continue to ramp up the pressure on the limited stock of rental homes available."

Rents rose by 4.9 per cent year-on-year in London. Only the South West and Wales saw rents decrease in the last 12 months.