North-South divide will hit rental values


Governments with money centralise and those without decentralise. The Spending Review was predictably light on many details of the impending rolling back of the state, leaving local authorities to deliver the bad news.

But some noteworthy headlines emerged, such as the 60% cut in the affordable house building budget and that new council house tenants will pay higher rent at 80% of the market rate.

These cuts in particular are important because of their impact on buy-to-let.

Over the last decade, social housing stock has steadily declined with the private rented sector filling the gap. But the buy-to-let boom created false markets illustrated by the empty new-build developments in cities across the UK.

The scars of this lending are still with lenders and yet the government’s measures will drive more people into the private rental market.

In parts of the country such as the South-East we’re seeing record average rents already. Greater demand for private rented housing as people refrain from buying and diminishing confidence in the face of public sector job losses will ensure this trend does not change.

But for other parts of the country where public sector jobs represent up to 50% of the employment base, house prices and rents will come under pressure.

The North-South divide we are witnessing in house price values will be reflected in rental values.