Thu, 19 Aug 10
Rents have risen for the sixth month in a row, according to latest buy-to-let sector figures.
The figures from LSL Property Services show that rents rose by 0.5% on average during July.
The figures indicate that landlords are turning to rental income to boost their annual returns as house process level off and potential profits from selling stock dwindle.
The average UK monthly rent is now £676, which is 2.3% higher than a year ago and £12 per month lower than the market peak of two years ago. This latest increase in rents puts the average yield in July at 4.9%.
The proportion of rent in arrears still remains high, with 9.2% of UK rent unpaid in July. This amounts to around £213m. However, the arrears figures are down from 11.2% recorded at the start of the year.
David Newnes, estate agency managing director at LSL Property Services, said: “Rents are still playing catch-up with the gains house prices made in the last year. The recovery in prices 12 months ago caused an exodus of accidental landlords from the market, ending the glut of supply of rental accommodation.
“Although house price rises have levelled off, landlords are still reaping the benefits of the constrained supply, and the improving yields have restored a healthier balance to the dynamics of property investment.
“We don’t expect rents to fall away any time soon. With inflation well above the Bank of England's target, interest rates can only go one way – north. When they rise, many landlords will face increased monthly mortgage repayments – and many will try to raise their rents to cover the difference.”
By Joe Lepper
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