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BLOG: Help to Buy won’t halt rent rises

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15/11/2013
Help to Buy may have arrived but for the foreseeable future rents are set to keep rising on an annual basis, although these increases may slow.
BLOG: Help to Buy won’t halt rent rises

Landlords have rapidly expanded the supply of homes to let – and this is demonstrated by below-inflation rent rises.

However, a significant fall in rents is unlikely given the sheer scale of demand – and fundamental restrictions on the supply of new homes.

Since the financial crisis struck five years ago, around three million people – some of who would have otherwise joined the ranks of first-time buyers – have been unable to become homeowners.

Partly as a result, we estimate that around one-in-five people in the UK is now renting in the private sector – a proportion that’s gradually rising. Combined with a healthier economy and recovering mortgage market, schemes like Help to Buy will definitely have some impact on that figure.

But even if the growing backlog of aspiring homeowners can be offered enough help, there are more and more joining their ranks every year. For many households even a 5% deposit is a struggle. So for the time being at least, the rental market is more realistic – and more immediately affordable – for millions.

Looking a little further ahead, rents will depend on the supply of new homes in a similar way to house prices. Currently, property is only becoming scarcer. Until new building catches up with the creation of new households that won’t change.

Even before 2008 there was a long-term trend toward private renting. That more gradual trend actually started in the mid 1990s – and given today’s fundamental restrictions on new housing, it’s a shift that seems set to continue.

David Brown is commercial director of LSL Property Services

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