Rents soar 15% as home buyers are driven out of the market

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Rents in Britain are set to rise significantly in the short-term as potential house buyers scrap plans to get on the property ladder.

According to a new report, rentals will increase by up to 15% over the next two years following the disappearance of 100% mortgage deals.

Landlords collectively have over £500 billion invested in UK buy-to-let properties, more than the value of all privately owned commercial property put together.

The research estimated that homes in the private rental sector were worth up to £530 billion, outstripping the value of all privately owned offices, shops, hotels, factories, warehouse and leisure facilities, which are collectively worth £503.88 billion.

The report, by Professor Michael Ball, of Reading University, said the value of rental property looked set to continue to outstrip that of commercial premises, as house prices are expected to rise quicker than commercial property ones over the long-term, despite the current market downturn.

But despite rising rents and claims that buy-to-let investors have pushed property prices beyond the reach of many first-time buyers, Prof Ball said the sector actually helped to stabilise the housing market.

This is because it accommodated people who by this stage in the cycle would be overstretched and facing rising levels of negative equity if they had bought their own place.

He said a re-run of the 1990s crash, when problems with negative equity prolonged the housing market recession, was less likely to happen this time as a result of the more developed rental sector.

The report, carried out for the Association of Residential Letting Agents, said it was now feasible for younger households to rent decent accommodation on a scale that was impossible for older generations.This was contributing to a delay in the age at which people bought their first home.

The number of people renting is expected to increase by around 3 per cent a year going forward, although in some regions of the country, such as London and the surrounding area, growth is likely to be stronger than this.