Rents continue to rise according to LSL index
The latest set of data from one of the leading agents in the property market confirm that private sector rents are continuing to rise annually in all but three regions across the UK. They suggest activity in the market has accelerated due to people turning to renting as a preferable, affordable and viable alternative to home buying and selling in the current housing and economic climate. This high demand has added to the usual seasonal mobility that ordinarily occurs at this time of the year, causing rents to increase even more.
The data is derived from the latest buy to let index supplied by LSL Property Services, who own the national chains Reeds Rains and Your Move, placing them in a unique position to assess movements in the market day-by-day and month-by-month across thousands of transactions.
Their assessment confirms rents rose for a second consecutive month in May, bringing the average to £712 per month in England and Wales - which means rents are now 2.3% higher than they were a year ago. This welcome news will be reassuring for buy to let landlords and an encouragement to the wider property market, as it reaffirms the anticipated positive performance of long-term property investment, even in challenging economic times.
Rents increased in most regions on a monthly basis, with the highest rises shown in the northwest (1.7%) and East Midlands (1%). When compared against April's data, rents fell in four regions, with the highest recorded falls occurring in the East Midlands (1.5%) and in Wales (0.7%).
Unsurprisingly, rents have risen to extraordinary levels and in the fastest time in London, beating all previously recorded figures. The statistics show an annual increase of 4.2% in London, with the southeast following closely at 3.1%. The average rent in the capital in May was £1,038 compared with the previous high of £1,033 in November. Overall and across the UK, rents have now returned to levels that existed prior to the impact of the Stamp Duty deadline stampede created by first time buyers.
The Olympics have certainly had an effect on rent levels in London, but some people have also chosen to move away from the capital because of the much-anticipated disruption to transport and other infrastructures. The extra demand in regions around London is now filtering through and showing in the data. In addition, frustrated buyers are often still unable to acquire affordable mortgages or are unable to muster the higher deposits now generally required. This is increasing the general demand for rented properties - and rents are consequentially climbing as demand outstrips supply in some regions.
LSL Property Services suggest it is not just those tenants that are being forced into the rented sector that are increasing the demand, it is also being affected by the wait-and-see attitude towards the current owner-occupied housing market. Renting provides flexibility in uncertain times - and this is very attractive and even quantifiable by many movers.
Buy to let investors enjoyed a rise in the total annual return rate of rental property from 3.7% in April to an impressive 4.8% in May. Annual average returns have now reached £7,912, with rental income standing at £7,666 and capital appreciation at £245. LSL have said the data allows them to forecast an anticipated total annual return on property prices of 5.2% in England and Wales, assuming the trend over the last three months continues throughout the year.
Although there is still considerable financial pressure on many households, the reduction in rent arrears recorded during May compared with the previous month would seem to add weight to the conclusion of many in the industry - that the private rented sector is secure and stabilising, even despite continuing economic challenges in the UK housing and mortgage markets.
Written by Tony Booth, an expert in buy to let and property investment.