20 Feb 2007

Rent hike

OMG! The rent on our flat is to be raised by slightly over 5%! Isn't this the final proof that the rental apocalypse foretold by the media is finally upon us?

The answer, of course, is 'no'. The rental increase will occur after we've been living in the place for 1.25 years. It's true that over the same period, compounded inflation only amounts to slightly over 4%. However, if one assumes that the price of rent when we moved in was correct at that time, then we've being paying less and less than the true price every week since then. In short, a rental hike above the rate of inflation is necessary at this point to maintain the overall average rate of profit generated by our landlord. That is to say, that an individual rental hike being over the rate of inflation is to be expected if prices are keeping pace with inflation – it's only averaged over time that rents may actually be judged in relation to other indices of inflation.