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MARKET REPORT Rents at an all-time high says LSL
Rents reached their previous peak high in April after a spring surge in demand,
according to the latest Buy-to- Let Index from LSL Property Services plc. Rents rose by 0.8 per cent to £692 in April as annual rent inflation increased to 4.4 per cent. Tenant arrears rose with 11.8 per cent of all UK rent in arrears as bank holiday weekends affected payment. Total annual returns remain steady at 2.1 per cent as rent rises are balanced by dipping property prices in the last three months. In April, the average rent in England and Wales rose by 0.8 per cent to £692 per month, matching the record high reached in November 2010. The growth means that rents are now 4.4 per cent higher than a year ago, the highest annual
inflation since November 2010. The average yield reached 5.1 per cent in April as rents increased at a faster rate than rental property prices. David Newnes, Estate
Agency MD of LSL Property Services, owners of Your Move and Reeds Rains said, “The rental market is heating up as thousands of would-be tenants have taken advantage of the weather and long weekends to hunt for new rental homes. Even a slightly stronger supply of property has failed to cool rental inflation as landlords take advantage of the growing number of mortgage products available. Competition is fierce and tenants are paying a premium to secure properties. The average landlord is charging nearly £30 more a month than a year ago, and the rate of increase is unlikely to tail off as lending to first- time buyers remains subdued
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and demand for rental homes is stronger than ever.” Compared to March, rents
increased the most in the South West and the East of England, rising by 1.7 per cent and 1.6 per cent. Rents only declined in three regions – the North East, where they fell by 0.7 per cent, and the South
‘Stronger supply has failed to cool rental infl ation.’
East and East Midlands, where rents fell by 0.1 per cent. With rent rises balanced by a slight decline in property prices over the past three months, the total annual return on a property now stands at 2.1 per cent. The total annual return is now the equivalent of £3,509- £7,955 in rent, with a capital loss of £4,446. However, in areas like London and the
South East, annual returns are healthier. In London, landlords have seen a total annual return of 5.1 per cent (£11,981), while property investors in the South East are seeing annual returns of four per cent (£7,092). If property values continue to decline as they have in the last three months, over the next year, a property investor could expect to make a slight annual loss of £61 per rental property – £8,307 in rent, with a capital loss of £8,368. David Newnes continues, “Annual returns may have declined in recent months, but for long-term investors not looking to sell immediately, the buy-to-let sector is an attractive proposition. Healthy demand for the limited supply is driving up rents, and with mortgage finance for buyers still so constrained, this is unlikely to ease off soon.”
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60 JUNE 2011 PROPERTYdrum aiic ARTWORK
QUARTERv3.indd 1 16/10/10 15:54:12 DOG4625 Money woofs
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