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Private rents set to outstrip house prices over next 8 years

Private rents in the South West are set to increase significantly faster than house prices over the next eight years, with average rents set to swell by 48%. According to the National Housing Federation’s ‘Home Truths 2012’ report, Bath and North East Somerset could see a £409 rise in average monthly rents between 2013 and 2020, by far the most significant increase in the South West region. Whilst the average rent for the region as a whole is forecast to stand at £981 per month in 2020, Bath and North East Somerset would see average rents grow to £1,253 per month.

These projected rent rises follow on the heels of 37% increases in national rents over the past five years and are caused by years of not building enough affordable homes. In 2011, 390,000 new families were formed, but only 111,250 new homes were built; as this trend seems set to continue, rents look set to be forced upwards at a higher rate than house prices as more and more families turn to private rented accommodation.

Jenny Allen, South West lead manager for the National Housing Federation, commented: “The housing market is at the point of no return; with house prices and rents set to rise and thousands of families in the South West already really struggling to afford their home… Thousands of South West families are priced out of the market and are struggling to keep on top of their rents. As Home Truths shows, even working families are increasingly reliant on housing benefit to help pay their private rent.”

However, whilst the Home Truths report is forecasting dramatic rent increases, the government is painting a very different picture of the housing market by claiming that private rents are in fact going down. New housing minister Mark Prisk told the Commons that rents have fallen in real terms, because they have risen less than the rate of inflation: “The most recent official statistics published by the Valuation Office Agency in August 2012 show that median private sector rents across England rose by 0.9% in the year to June 2012, compared to a rise in RPI inflation of 2.8% over the same period. Rents have thus fallen in real terms, although there are local variations.”

Regardless of the discrepancies between the Home Truth’s predictions and Mr. Prisk’s comments, there is one thing that everyone seems to agree on: rents will continue to rise for the foreseeable future.