Rent rises stall as tenants quit to become first-time buyers

The company, which is parent to property chains Your Move and Reeds Rains, said a surge of first-time buyers quitting the private rented sector is easing the strain on the rental market and has stalled rent rises.

The average rent in England and Wales remained the same in June as in May, at £737 per month. The slowdown leaves rents 2.6% higher than in the same month last year –marginally below the rate of inflation at 2.9%.
The number of new tenants in June also indicated a slightly cooler rental market. Across England and Wales there were 0.8% fewer new tenancies in June than in May. However, activity has still seen strong annual growth. The number of new lettings in June increased by 3.5% compared to the same month in 2012.
Regional variation remains. Five out of ten regions saw rents rise in June. The sharpest monthly increase was in the East Midlands, where rents have risen 0.7% since May.  Second fastest were the North-West and South-West, with average rents in both regions seeing a 0.5% monthly rise.
The biggest monthly falls were in Wales, where average rents are down 1.9%. Rents in Yorkshire and the Humber fell by 0.6% since May, while the West Midlands saw average rents drop by 0.5%.
Meanwhile, rents in the South-East fell by 0.4% between May and June.
David Newnes, director of LSL Property Services, said: “The proportion of households in the private rented sector is still growing strongly, a trend that’s set to continue for the foreseeable future. Yet with better access to finance, the immediate picture has become far brighter for tens of thousands of first-time buyers. 

“Milder competition for tenancies has kept a lid on the cost of renting.
“In the longer-term, the number who can afford to buy a first home will be limited by some fundamental constraints – earnings, and the building of new homes. That’s why we expect average rents to at least match wider inflation in the coming years.
“Rents are still showing strong annual increases. Total returns are the same as a month before, and rental yields still represent a far more generous income than other assets of the same stability. 

“A reinvigorated purchase market will drive more investment in the private rented sector, not less. So as we’ve started to witness in June, more supply could be good news for tenants as well as landlords.”
LSL estimates that the amount of late or unpaid rent crept up to 8.3% of all rent across England and Wales, compared to 8.2% of all rent in May.

The LSL report is broadly in line with another from estate agency chain Sequence, which shows supply of rental accommodation growing ahead of tenancy demand.