News: National rents on the rise again, say agent group LSL

Tue, 26 Jun 12

Rents rose for a second consecutive month in May to stand at an average £712 per month in England and Wales –back to their January level.

According to the latest buy-to-let index from LSL Property Services, which owns the national chains Your Move and Reeds Rains, the 0.4% rise in May means that rents are now 2.3% higher than a year ago.

On a monthly basis, rents rose in most regions, with the highest rises in the North-West and East Midlands where they rose 1.7% and 1% respectively. Compared with April, rents declined in four regions, with the largest falls in the North-East, where they fell by 1%, and the West Midlands, where they decreased by 0.9%.

Rents rose annually in all but three regions, with rents falling by 1.5% in the East Midlands, 0.7% in Wales and 0.3% in the North-East.

Rents rose the fastest in London, where they hit a new all-time record,and the South-East, where they increased annually by 4.2% and 3.1% respectively.

David Brown, commercial director of LSL Property Services, said: “The end of spring has brought with it renewed activity in the rental market, and rents have returned to the level seen before the impact of the Stamp Duty deadline rush by first-time buyers.

“The reality is that thousands of frustrated buyers are still financially trapped between a rock and a hard place.

“Historically high rents and rock-bottom savings rates are hampering attempts to save for the larger deposits banks now require – not to mention meeting the cost of the reinstated stamp duty tax. In turn, fewer tenants are able to leave the sector, and the strong tenant competition is pushing up rents as a result, making saving for a deposit harder still.

“However, it’s not just involuntary renters that are adding to demand. Given the current concerns over the economy and labour market, the flexibility of renting is proving attractive for those adopting a wait-and-see approach to house purchase. Given this appetite for rental accommodation, rents are unlikely to see sustained declines any time soon.”

London’s average rents rose 0.6% in May compared with April, meaning the average rent in the month was £1,038, surpassing the previous high of £1,033 in November.

Brown said: “With London buyers needing to supply the largest cash deposits in the country, and the capital’s economy continuing to attract young professionals from around the UK, the rental sector is under greater strain than elsewhere in the country.

“This underlying demand is likely to be augmented over the coming weeks as tenants bring forward moves to avoid the disruption of the Olympics.”

Steadying property prices in May led the average total annual return on a rental property to rise to 4.8%, up from 3.7% in April. This represents an average return of £7,912, with rental income of £7,666 and a capital gain of £245.

If property prices maintain the same trend as the last three months, an average investor in England and Wales could expect to make a total annual return of 5.2% per property over the next 12 months – equivalent to £8,522 per property.

Despite the improvement in rental property prices, the average yield on a rental property remained steady at 5.2%, said LSL.

Overall rental arrears improved after a seasonal increase in April, with 8.9% of all rent late or unpaid at the end of the month, down from 9.9% in March. In total, unpaid rent in May amounted to £275m, down from £306m in the previous month.

Brown warned: “Rental arrears took a turn for the better in May.

“However, with the economy struggling and the labour market far from flourishing, households will remain under financial pressure, and it is crucial landlords are not caught flat-footed by a deterioration in tenant finances.”

See also: Rents by Town and Postcode

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