The cost of renting a property in London has reached an all time high, despite a slowdown in the increase of average salary, according to new research by tenant referencing specialist, HomeLet.
The average rental price in Greater London increased to £1,202 in August, compared to £1,154 the previous month, a record breaking amount, despite continued economic instability.
This is an increase of 12.2% compared to the same time last year, suggesting demand for rental properties in London is on the up as people remain unable to get onto the property ladder due to lack of mortgage availability and rising house prices.
Over the same period, the average salary of tenants in the region has increased by just 2.4%. This large gap in rental and salary increases indicates how London residents are feeling the squeeze. Although this means many tenants are experiencing financial strain, landlords are benefiting from the increasing rental income.
Another statistic from the August HomeLet Rental Index shows that the average tenancy length in Greater London dropped in the last two years from 27 months to 22 months.
‘Tenants in the Greater London area are stretching their budgets more than ever, not only due to an increase in rental costs, but also rising energy costs following the announcement by utility companies that gas and electricity prices are set to soar even higher. This isn’t a good sign for some tenants who may struggle as winter approaches and the cost of running a home increases even more,’ said John Boyle, managing director of HomeLet.
‘Despite increasing rents due to high demand, the private rented sector is still offering a stable alternative to home ownership. Whilst many tenants are still renting because they can’t afford to buy, an increasing number of tenants are choosing to rent for the long term because of the flexibility that that it offers,’ he explained.
‘The decrease in tenancy lengths would indicate that tenants are starting to move more frequently again. And we can expect tenancy lengths to decrease in 2012, as the level of high value short term rentals increases in 2012 during the Olympic Games, which is positive news for letting agents,’ he added.
But Paul Shamplina, founder of tenant eviction specialists Landlord Action, said rising rents have created an increase in inquiries from landlords facing rent arrears.
‘This is increasing all the time, and with a rental market that is very buoyant with average rents at an all time high we will, unfortunately, see tenant arrears figures continuing to grow nationally,’ he said.
‘With job losses and the general stagnating of wages some tenants are struggling to make ends meet on a daily basis. This coupled with rising utility bills and the general cost of living is a recipe for tenants to fall into arrears. On the other side of things, landlords will also be struggling and will be less tolerant of tenants not paying their rent on time,’ he explained.
‘My advice to both tenants and landlords is to have an immediate dialogue as soon as a problem with rent arises. Tenants need to be honest as to why rent hasn’t or won’t be paid. Rather than undertaking legal proceedings, it is always better to see if there is a way to mediate the problem first,’ he added.