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House prices stall as the ‘age of renting’ arrives

House prices stall as the ‘age of renting’ arrives

Category: Mortgages

Updated: 27/08/2010
First Published: 27/08/2010

This article was correct at the time of publication. It is now over 6 months old so the content may be out of date.

The age of renting is upon us but the house price recovery is set to stall, according to the latest surveys evaluating the property market.

The Land Registry reported a 0.4% rise in the average price of homes sold in England and Wales between June and July.

However, the Government department also noted that the annual rate of increase had now fallen for the second month in a row, after 15 previous months of rising growth.

As a result, house prices are now just 6.7% higher than a year earlier, down from the figure of 8.5% reported last month.

While the housing market seems set to struggle, a separate survey suggests that therecent buoyancy seen in the lettings market will continue for some time yet.

The Royal Institution of Chartered Surveyors (RICS) revealed that increased tenant demand and a shortage of properties to rent pushed rents higher in July.

Ongoing difficulties in securing mortgage finance, worries over a double dip in the housing market and the large deposits required by lenders all contributed to heightened rental demand, pushing rents higher for the second consecutive quarter.

RICS said that although record low interest rates meant property investment remained an attractive option, problems in securing buy-to-let mortgages were holding prospective landlords back.

The new supply of rental property to the market has now fallen for the fourth quarter in a row, while existing landlords looking to expand their portfolios also continue to struggle to access the finance they need.

"With fewer owner-occupier mortgages available, limited resources in the social housing sector and wider social and demographic changes, such as a growing population, increasing net migration and rising numbers of single person households, we are entering the age of renting," said John Heron, managing director at Paragon Mortgages.

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