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.
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.