Zoopla figures out today show rents are up 11% in a year – a 14-year high and Hargreaves Lansdown has claimed it is this that is maintaining housing market buoyancy.
The figures revealed that the average UK rent is up £88 to £995 and found that in London, a single earner has to spend 52% on the average rent, while in the UK as a whole, rent eats 37% of average earnings.
Zoopla has released its Q1 Rental Market Report today.
Sarah Coles, senior personal finance analyst, Hargreaves Lansdown (HL), said: “The property market isn’t actually defying gravity: the 11% hike in rents over the past 12 months has been the hidden string holding it up.
“Enormous pressure from runaway bills, rises in mortgage costs, and big drops in consumer confidence has historically meant house prices started to weaken.
“And while nobody is ruling it out eventually, for now they are riding high. Rising rents are the missing piece of the puzzle for those trying to understand how house prices are still rising so quickly.
“Rents have bounced back from falls during the pandemic, and are up 11% in a year. London, which suffered particularly during the race for space, has bounced back even harder – with rents up 15%.
“Rising rents knock increasing mortgage costs into a cocked hat, so moving from a rental property into an equivalent home with a mortgage will see your monthly costs fall.
“And while this hike in rent makes it harder to save for a first property, it also means there’s nothing to be gained from putting off a property purchase.
“A new let in London will cost you over £20,000 in rent over the next 12 months, which is money that may as well be paying off your mortgage.
“Meanwhile, although house prices may well rise more slowly in the coming months, we’re not seeing any widespread conviction that house prices will actually fall – so you could still see property get more expensive while you wait.
“There’s also a hidden benefit for mortgage holders from inflation, because it erodes the value of your debt. Anyone borrowing this time last year will have seen inflation eat up 7% of the real value of their debts – even before you factor in any repayments.
“The pressure on rents shows no sign of abating. Landlords continue to sell up in order to capitalise on higher house prices, so there are fewer properties left for the growing number of tenants.
“The latest RICS report highlighted that in some areas there are ten tenants chasing every property. Right now there are no signs that the hidden string holding the property market up is going to be cut any time soon.”
