The difficulty first time buyers are experiencing in buying a property is fuelling a steep rise in rents.
***Updated April 2012***
Figures released in August showed that the average rent in June 2011 stood at £876, the highest on record, as people either chose or were forced to continue renting as a result of the difficulties many face securing a mortgage offer and saving for a deposit.
First time buyers are paying record rents, damaging their attempts to get on the ladder
Property website findaproperty.com revealed that the most expensive region to rent was, unsurprisingly, London where the average rental property generates a whopping £1,979 a month, though this is somewhat skewed by the rental cost of extremely exclusive central London properties. The cheapest area to rent is the North East, where the average is £582.
The only area where rents dropped was the West Midlands, which saw a 0.3% fall in three months, while the neighbouring East Midlands saw the fastest rise, 3.5% in the same period.
The rise represents a 4.4% increase on last year’s figures and is very good news on buy-to-let investors, who can currently achieve returns that outperform cash ISAs and the struggling equities market. Against that backdrop, it is perhaps not surprising that almost 10% more properties are on the rental market.
That figure also indicates that more buyers come from the more-financially secure investor bracket than those looking to secure a home. For first time buyers, the problem is a self-perpetuating one. Their inability to get on the property ladder has fuelled a rental boom, and as their rental payments increase, their ability to save towards a deposit decreases.
March’s budget further hit first time buyers with news that their preferential treatment on Stamp Duty Land Tax – they did not have to pay any on properties worth up to £250,000 – had been removed.
Working in their favour, however, are schemes like NewBuy which provide 95% mortgages for new-build properties to all buyers, but with the government predicting first time buyers to be the main beneficiaries, along with housebuilders.
