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The inexorable rise of private rents Matthew Warburton - 31/01/2013

tight_budget_300Last year, while wages remained static, private rents rose by an average of nearly 3 per cent, or £300 a year, according to an analysis of Valuation Office data published by Shelter this week.

 

But there is considerable variation in the rate of increase from area to area, with increases over 10 per cent in parts of London and the South East, and topping 14 per cent in parts of Surrey.

This contradicts the government's assurances that benefit cuts would slow the rate of rent increases, but it is hard to see why anyone would find these credible anyway, since most private tenants are not getting help with their rent. The reason why market rents are rising is a simple matter of supply and demand.

There is a shortage of accommodation, particularly in those areas where the local economy is strong and jobs are available; landlords can get away with charging more and tenants have little alternative but to pay.

Supply of new homes, whether for sale or for social - or rather affordable - rent, remains at a shamefully low level. And in case anyone needed reminding of this, the NHBC also published figures this week, which show a 9 per cent fall in registrations of new housing, from 114,930 to 104,510, while completions remained flat at around 112,000. The cause was a sharp fall in public sector registrations, from 38,680 to 26,390, while private registrations remained steady.

It would be foolish to expect the upward drift of private rents to do anything but continue or accelerate, particularly if, as seems likely, economic recovery when it comes continues to favour the already prosperous South East.

The only factors likely to head off rent inflation are either a significant increase in the supply of rented housing - public or private - or a major initiative to ease access to home ownership. Ironically, in most areas average mortgage repayments are less than market rents for the same properties.

While the government is dabbling with initiatives to promote new building for private rent and help first time buyers, it is not taking action on anything like the necessary scale. Time for Plan B?

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