Home Rents Reach Record in England and Wales as BOE Frets

Residential rents in England and Wales rose at the fastest pace in six years to a record of 789 pounds ($1,232) in June as higher wages and a strengthening economy allowed landlords to charge more.

The 5.6 percent annual rent increase beat home-value growth for the first time since July 2013, according to a buy-to-let index compiled by brokers Your Move and Reeds Rain. Total return, a combination of capital value gains and rental income, averaged 9.2 percent in the period.

“The pedal is pressed to the metal in the rental market,” Adrian Gill, a director at the brokers, said in Friday’s report. “Expanding our housing stock needs to become a national priority.”

The returns have drawn amateur landlords. Buy-to-let loans made up almost 20 percent of all new mortgages in the first quarter, raising concerns at the Bank of England. Governor Mark Carney said this month that officials are monitoring the market’s growth and have asked for a review on potential threats to financial stability from the sector.

Chancellor for the Exchequer George Osborne is reducing a mortgage-payment tax break that has helped landlords outbid owner-occupiers for properties. Starting in April, investors will also have to produce receipts to gain a wear-and-tear allowance; previously it could be claimed without changing the furnishings.

That may cause rents to accelerate further as landlords attempt to pass on the cost of the reduced allowances to tenants, Friday’s report said.

The cost of leasing a home in London now averages 1,241 pounds a month, a 9.6 percent gain from a year earlier. The index is based on the rent paid for about 20,000 properties.

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