Rental levels in the UK reach record levels

Average monthly rent in the UK now stands at over £1,000 for the first time.

In the private rented sector average rents rose four per cent in the first quarter of 2008, new figures from buy-to-let specialist Paragon show.

Over the last six months rents rose 12 per cent to an annual figure of £12,041.

The rising rents put further pressure on first-time buyers locked out of the mortgage market by the credit crunch until they can raise sizable deposits.

A third of landlords now report tenant demand is expanding rapidly – the highest level in nearly four years – as first-time buyers delay stepping onto the property ladder.

Some 58 per cent of landlords said demand was stable and strong.

Rising rents have masked the effects of falling house prices for landlords – with yields remaining stable at 6.3 per cent for the third consecutive month.

John Heron, Paragon director of mortgages, said: "The backdrop for buy-to-let remains positive across the country - potential residential purchasers are reluctant to buy in the current market or are unable to secure a mortgage and this is fuelling extra demand for rented accommodation.

"The professional end of the market remains committed to buy-to-let over the long term. They typically hold their investments for a decade or more, they are not intending to sell following the CGT changes and they are not experiencing pressure on their finances as a result of the credit crunch, as they borrow an average of less than 40 per cent of the value of their portfolios.

"On top of that, they are enjoying steady growth in rents. The average rental property now generates in excess of £1,000 per month, and this upward trend looks set to continue in the future."

Data from the Association of Residential Letting Agents (Arla) last week points to rents continuing to increase as a result of the credit crunch.

While the credit crunch means buyers need to stump up larger deposits, seasoned buy-to-let professions are expected to do well from falling house prices as they will still be able to secure mortgages as they have the necessary clout behind them.

Daniel Barnes