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Last Updated: Monday, 16 June 2008, 07:57 GMT 08:57 UK
Rents rise as credit crunch bites
By Jim Reed
Newsbeat reporter

Housing
Rent prices are rising in the wake of the credit crunch

Economists claim young people struggling to get on the property ladder are now facing the "double whammy" of rising rents.

The cost of renting property in some parts of the UK has increased by more than a quarter over the last year, according to new research.

The website findaproperty.com found housing rent increased by an average of 5.9% between July 2007 and May 2008.

The move comes following the recent credit crunch.

Richard Donnell at researchers Hometrack said: "Rents are already on their way up sharply in some areas and they’re likely to rise even more quickly over the next few years."

Regional rises

The North East of England, Northern Ireland, the West Midlands and Yorkshire and the Humber reported the steepest rises of between 10% and 28%.

Rents for one and two bedroom flats in North East England, Northern Ireland and Wales also showed strong price rises.

A separate city-by-city analysis by Hometrack shows rents in places like Cambridge, Birmingham, Manchester and Central London have increased by between 10 and 20% over the last year.

The credit crunch means the number of mortgages available to first-time buyers has been dramatically reduced.

Banks and building societies are charging more for home loans and asking for much larger deposits.

As a result, lending fell by 36% in April compared with last year, according to the Council of Mortgage Lenders.

Increased demand

A fall in the number of first-time buyers is leading to an increase in demand for private rented housing.

The website rightmove.co.uk reported more than 11 million searches for rented accommodation in May, up 67% on last year.

Increased demand for rented property means that landlords have been able to put up prices in many areas.

Rent rises in the UK
Yorkshire and Humberside 28%
West Midlands 13%
Northern Ireland 11%
North East England 11%
London 9%
Source: findaproperty.co.uk
Local estate agents in York estimate that rental prices in the city centre have increased by between 10 and 15% over the last year.

Accountant John Armstrong, 23, is paying £600 a month to rent a two-bedroom flat on the outskirts of the city.

His £19,500 salary doesn’t leave much left for luxuries like going out.

He said: "I would have liked to spend a lot less but compared to my mates' flats I am getting a fair deal.

"I managed to negotiate the landlord down because I work with him. I'm left with a couple of hundred quid a month which doesn't really get me very far. I just have to get used to spending less.

"The first couple of months I learnt from my mistakes. Now I'm going for the budget brands and cutting down on the amount of drinking I do after work."

Higher rents

But the pattern of higher rents is not reflected across the whole of the UK.

In cities like Leeds and Nottingham, rents have fallen as large blocks of newly-built flats have come on to the property market.

The Government is focusing too much on home ownership, and not enough on homes for rent
Dermont Finch
The increased supply makes it harder for local landlords to increase rents as tenants have more options to choose from.

But many economists and local estate agents say rent in these areas could rise over the next year as developers hit by a slowdown in the housing market cut back on the number of new properties they are building.

Seema Shah at Capital Economics expects average prices to go up another 11% by the end of next year.

In some areas they could rise much more than that.

The news comes as a separate report calls on the Government to do more to increase the amount of private rented accommodation on the market.

The charity Centre for Cities reckons that the number of renters in the UK will grow from 2.4m to 3m by 2021.

Director Dermont Finch said: "The Government is focusing too much on home ownership, and not enough on homes for rent.

Flats
Rents for one and two bedroom flats also showed strong price rises
"Demand for rented housing is increasing all the time - but supply isn’t keeping up. Unless this changes, the young and job movers will have difficulties finding somewhere decent to live."

The charity wants the Government to make it easier for big investors like pension funds and insurance companies to finance more rented accommodation.

A spokesperson for the Department of Communities & Local Government said it recognises that rented accomodation is often ideal for younger households.

An independent review into the problems that both tenants and landlords face is expected to report back before the end of the year.



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