UK rents surge at record pace as home sellers lift asking prices

LONDON – Britain’s property market has shattered another record with rental costs growing at the fastest pace in at least a decade, while home sellers pushed up asking prices for the first time in four months, two separate reports showed.

The figures underscored inflationary pressures in the British economy that are alarming the Bank of England and adding to pressure for another hike in interest rates later this week.

They are also an indication of turmoil in the property market, which is having a heavy impact on consumers.

Tenants paid 12 per cent more than a year ago for new rental agreements in August, the largest rise since property broker Hamptons began publishing its letting index.

The average rent in Britain is now £1,300 (S$2,200) a month, up £140 from a year ago and the highest on record, the broker said.

In the sales market, property portal Rightmove said sellers bumped up the prices they were asking for by 0.4 per cent in September, the first time asking prices have risen since May.

But this was well below the increase usually seen at this time of the year – over the last decade, prices have risen by an average of 0.6 per cent in September.

The central bank is hoping that its longest string of rate hikes in three decades reins in inflation.

But the measures have raised the cost of buying a home, leaving more people stuck in the rental market.

They have also cut into the value of renting out property, prompting landlords to sell and exacerbating a shortage that has driven up rents.

The convulsions in the property market – including the abrupt halt of more than a decade of rising house prices – is a risk for Prime Minister Rishi Sunak’s government, with a general election expected in 2024.

Rightmove’s figures are the first major piece of data about the housing market in September.

Mortgage lenders Nationwide and Halifax earlier reported that property prices are falling at their sharpest pace since 2009, and the Royal Institution of Chartered Surveyors said that estate agents remain gloomy about the outlook for the property market.

Economists expect a 10 per cent plunge in prices during this slump, and mortgage lender data suggests Britain is about halfway thorough that downturn.

While rate rises make borrowing more expensive, many home owners have yet to feel the pain as they are on fixed-term deals which have not yet expired.

Forces slowing the property purchase market are leaking into rentals and helping to fan inflation-busting increases in the cost of lettings.

A shortage of new instructions by owners to rent their properties out is compounded by anaemic construction levels, with the rate of new home building plunging as developers pull back on new projects.

“Each passing month has ushered in a new rental market record,” Hamptons head of research Aneisha Beveridge said. “Rents have risen more in the past 12 months than they did between 2015 and 2019.”

Rents are rising fastest in London as they catch up from a slump during the Covid-19 pandemic.

Residents in the outer regions of the capital now face a 30 per cent higher bill than in January 2020, before the first lockdowns encouraged some residents to escape the city.

September market

September is an important month for property sellers, with buyers returning from holiday and making decisions about moving.

Since the start of September, Rightmove has found an “encouraging” uptick in inquiries from home owners looking to enter the market.

On an annual basis, however, asking prices are still falling.

The 0.4 per cent slide in September was the biggest drop since March 2019.

Price reductions have hit a level not seen since January 2011 – 36.3 per cent of properties for sale have been knocked down in price, with the average reduction equating to £22,700, or 6.2 per cent.

While rising borrowing costs have been deterring buyers across the board, Rightmove said there were “small steps” being made towards improved affordability conditions, with the average five-year fixed mortgage now at 5.67 per cent, down from a peak of 6.11 per cent in July. BLOOMBERG