With inflation at a two-year low, now running just above the Bank of England’s 2 per cent target, relief for tenants is tempered by the spread of rent increases across the south.
Average rents have now breached the four-figure (£1,000 per month) mark across Surrey and Hertfordshire, as well as in parts of Kent, Berkshire, Essex and East Sussex and the university towns of Cambridge and Oxford, according to a Sunday Times report.
Cheaper oil prices will likely keep inflation and interest rate rises in check, as economists are now forecasting an annual consumer price rise of just 2.1% when the Office for National Statistics (ONS) publishes it new inflation figures for December 2018 later this week.
Falling inflation would confound members of the Bank’s monetary policy committee (MPC), who had been expecting to approve interest rates raises twice this year, unless that is, an EU departure in chaos leads to a severe economic slowdown.
“Inflation seems to be falling faster than the Bank expected,” Martin Beck of forecasting firm Oxford Economics told The Sunday Times. “Some members of the MPC may have to rein back their hawkishness.”
It seems that markets are sceptical of any rise above 0.25 per cent above the current level of 0.7 per cent this year, given the December share sell-off in global stock markets. This has persuaded the US Federal Reserve Bank to scale back on its plans for higher rates this year.
With average rents above £1000 a month for a 2-bed property now spreading out of London and across the south the under-40s are increasingly priced out of buying their own homes.
The figures released from the Valuation Office Agency (VOA) highlight the plight of “generation rent”, the cohort of 25-35 year olds on average salaries, where home ownership has collapsed from 65% twenty years ago, to just 27% two years ago, that’s according to the Institute for Fiscal Studies (IFS) data.
All 32 London boroughs now have these average monthly rents of more than £1,000, so workers are increasingly moving out to popular commuter locations, where in turn rent rises ensue.
While generally rent increases have outstripped wage rises in the south, this picture is mixed across the country, with falls in rent levels in some locations, particularly further north, for example, in the northeast, according to Homelet, rents have dropped by as much as 4.6% in the last year.