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Mortgages are hard to get and now rents are rising
Mira Bar-Hillel, Property Correspondent14.05.08
Would-be homeowners in London are facing a housing Catch-22.
Figures show that while house prices are falling, there have been inflation-busting rent increases across the capital in the past year.
But the ongoing credit crunch means first-time buyers cannot get a mortgage - and the high rents mean they cannot afford to save for a deposit on a property.
The figures, compiled for the Evening Standard by agents Winkworth, show average rents across 15 districts.
The cheapest rent available is £725 a month for a one-bedroom flat in Barnet. Renting a small flat in Hackney costs £850 or £900 in Tooting.
At the other end of the scale is the West End, where the average monthly rent for a one-bedroom flat is £2,000, rising to £7,000 for some bigger houses.
In St John's Wood, the average monthly rent for a one-bedroom flat is £1,500, rising to £7,800 for a four-bedroom house.
The figures also show that compared with last year, rents have increased by an average of about eight per cent, more than twice the rate of inflation, which is running at between 2.5 per cent and 4.1 per cent.
The increase in rent for two-bedroom flats, which are in particular demand, has been even more steep - around 15 per cent in Tooting and 12 per cent in Hammersmith. Winkworth forecasts that rents will rise another five to 10 per cent over the coming year.
Nick Jopling, a property expert with investment consultants CBRE, said: "Young people who cannot afford to buy or get a mortgage under current constraints are between a rock and a hard place.
"They are forced to rent privately, which is putting upwards pressure on rents. This in turn is making it even more difficult for those renters to save for a decent deposit towards their future move on to the housing ladder.
"The only options they have are to move to cheaper areas in the outer boroughs - or share houses or flats."
Dominic Agace, managing director of Winkworth, said rental activity was up 30 per cent compared with last year.
"Many people are renting as they wait for wider economic sentiment to settle," he said.
David Cleary, a Winkworth agent in Fulham, said: "The rise in rental prices could have an effect on first-time buyers' ability to save for a deposit but the main hindrance is still historically high property prices that make it difficult for them to get on the property ladder, even after recent reductions in house prices." Shepherd's Bush agent Suzanne Cloherty added: "We now have more families wanting to rent in between selling and buying a new property.
"One- and two-bedroom flats continue to be popular with potential first-time buyers who are still priced out of the market. Those wishing to save for a deposit have started opting for one-bedroom flats at the cheaper end of the range in order to be able to put money aside for it."
Experts point out that even though house prices are stuttering and rents increasing, historically high prices mean renting a home is still cheaper than even interest-only mortgages.
Reader views (4)
The view of the lettings agents I have spoken to locally is that (at least in Battersea) there is a glut of rental property, (partly because so much won't sell) and that rental prices are if anything slightly LOWER than a year ago.
- Martyn, battersea
And so the scene is set again for buy to let to continue. If rents are increasing, landlords are less likely to sell up and get out of the market, leading to short supply of new housing stock on the market and thus there is a potential for increase in house prices again.
Of course the lack of liquidity in the mortgage market may put a bit of a hold on this, but lets face it, London has a limited stock of accommodation and a burgeoning population so any price drops are likely to be short lived
- Headhunter, London
These Landlords are the ones given buy to let mortgages they are trying to recover the cost of their rise.
- Dave, Croydon
HIPS report anyone? Talking about bad timing to introduce these taxes...
- Jacqueline, Hampstead, London
