UK Rents and House prices rise again as lack of property benefits landlords, sellers

The price of buying or renting a home in the UK continues to rise with two separate official sources of information confirming that news with their latest releases of data.

The Office for National Statistics (ONS) reports that average rent levels in the UK in December 2015 were 2.5% higher than the same month in 2014. The data also showed that rents have risen by more than 2% for most of 2015 although they ended the year a touch lower than the 2.7% increase reported earlier in the year.

While the ONS don’t comment on the general market or give anecdotal reasons for changes, its statistical bulletin shows that rents rose across all UK regions. The largest rise was a 3.9% gain in London, while the lowest was 0.6% in the north east of England.

The Royal Institution of Chartered Surveyors, or RICS, meanwhile, said that average house prices also rose during January of this year. The RICS added that it expects house prices to rise further in the coming months. The reason for that expectation? Well, according to the RICS it’s two-fold; a lack of residential property in the UK and an increase in activity among buy-to-let investors ahead of the tax changes in April that will see their fees rise.

“New buyer enquiries rose for a tenth month in succession with the pace of growth accelerating for a second consecutive report,” the RICS said in its survey. “Feedback to the survey continues to suggest demand is being bolstered by a rush of buy-to-let investors looking to complete transactions before the 3% Stamp Duty surcharge comes into effect in April.”

These data suggest that prices are set to continue to rise, further delaying would-be first-time buyers from stepping onto the property ladder.

However, while house and rental prices continue to rise, there is a small spot of hope for future home-buyers in the form of interest rates and earnings growth – not to mention the growing interest in the lack of affordable residential property in the UK.

The ONS’ latest jobs and earnings data showed that average earnings growth in the UK was 2.0% in the three months to December compared with the three months the September. While it’s not the highest gain of the year, it helped push the average rate of earnings growth above 2% for the whole of 2015. That’s the first time that’s happened since 2008! In the mean-time interest rates are set to remain unchanged for at least the remainder of 2016, and any eventually increases will be slow and incremental. This is good news for mortgage rates as they should remain at reasonable levels for some time.

The combination of rising earnings and lower rates for longer should help those potential first-time buyers grab hold of their first rung of the property ladder – provided rents increases don’t accelerate further.