Rents rise due to constrained supply
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The average UK rent rose by 1% in June due to constraints in supply, according to the Buy-to-Let Index from LSL Property Service.
Rents have risen for five successive months and are 3.2% higher than a year ago – the equivalent of £23 more per month than a year ago and the average rent is now £673 per month, the highest level since November 2008.
David Brown, commercial director of LSL Property Services, says: “Rents have continued their upwards trajectory, and are just a few pounds away from their peak levels in 2008. The seasonal pick-up was exaggerated by the squeeze in the supply of rental accommodation.
“Although landlords were not clobbered as badly as feared, it is possible that some left the market in the run-up to the Budget, and concerns over the new Capital Gains Tax rate dampened the number of new investors entering the market in June. But the restricted availability of buy-to-let mortgage finance has been the underlying factor holding back investment in the sector and the number of new rental properties hitting the market.”
London rents rose by 1.9% to average at £942 while the North saw increase of 1.4% and the North-East 1.3%.
But the West Midlands bucked the national trend, recording a drop of 1.7%.
Brown adds: “London rents have climbed for five consecutive months, and there is no sign of a slowdown. There is an acute lack of affordable housing in London, and would-be buyers cannot afford the rising house prices – or get big enough mortgages. The increasing reliance on rental accommodation in the capital, combined with the constraints in its supply is pushing up rents faster than anywhere else in the UK.”
Yields on buy-to-let properties increased up to 4.9% and the average house price for rental property fell by 0.25% compared to May.
The total return from investing in buy-to-let over the last twelve months fell slightly to 12.3% in June as house prices fell slightly and the average landlord would have made £18,983 in the past year from £7,164 in rent and £11,819 in capital gains.
Tenant arrears fell in June. £234m of all rent in the UK was unpaid – a decrease of £10m from May. This represents 10.1% of all rent in the UK – down from 10.7% in May.
Brown says: “May’s arrears figures were warped by the bank holiday weekend at the end of the month, causing late payment. In June, arrears were in much better shape.”
