Residential rents rise across England and Wales for the first time since 2011
For the first time since 2011 every region of England and Wales has seen annual residential property rent rises, new data published today (Friday 17 May) shows.
Average rents in England and Wales increased by 0.2% in April and are now 3.9% higher than a year ago, according to the latest buy to let index from LSL Property Services which owns the UK’s largest lettings agent network, including national chains Your Move and Reeds Rains.
But the data also shows that tenants struggle to improve their finances as there are £282 millions worth of rent still in arrears.
On current trends the average landlord in England and Wales could expect to make a total annual return of £9,496 per property over the next 12 months.
London rents hit a new record of £1,110 per month and are now 7.6% higher than a year ago. There was an annual rise of 5% in Wales and 4.1% in the East Midlands. While the South West was the only region to see annual falls in March, but this reversed in April, with annual rent rises of 0.5%.
On a monthly basis, eight out of ten regions saw rents rise. The strongest of these increases was in the East Midlands where rents rose 0.6% from the month before. This was followed by the North East and the South West where rents posted a 0.5% gain in both regions. Meanwhile, rents dropped the fastest in Wales, falling 0.3%. The second region to see a monthly fall was the North West, with rents in April 0.2% lower than a month before.
Rents everywhere are higher than a year ago at a time when pay has crept up at the slowest rate in years. But some regions are suffering even more than others,’ said David Brown, commercial director of LSL Property Services.
He pointed out that despite a year on year increase across the board, the divergence between London and the rest of the country is continuing, even if a little slower than last month. Meanwhile, other regions with traditionally weaker labour markets are suffering the same rent rises. For example, rental rises of 5% in Wales will be keenly felt.
‘Landlords across the UK have increased the stock of rental properties by around 10% since 2008 but the more fundamental squeeze is still coming from a lack of new building,’ said Brown.
The index also shows that the total annual return on a rental property rose to 5.9% in April. This represents an average return of £9,679 with rental income of £7,807 and a capital gain of £1,872. The average yield on a rental property was 5.3% in April, compared to 5.2% in the same month last year.
If rental property prices maintain the same trend as the last three months, the average investor in England and Wales could expect to make a total annual return of 5.7% per property over the next 12 months, equivalent to £9,496 per property.
‘Further increases in the rental stock will be dependent on sustained improvements in the availability of finance for landlords. However, new buy to let lending dropped in the first quarter, just as purchase prices are starting to move up more steadily. Price rises can be a double-edged sword for renters and landlords, not just owner-occupiers,’ explained Brown.
‘On the one hand, landlords have already responded to mounting demand, and capital accumulation has made up more of many landlords’ total return than rental income in some areas. However, if property is more expensive to buy then in the long run it will always be more expensive to live in. And that affects everyone. Schemes like Help to Buy could be very good in helping first time buyers but renting continues to prove more flexible than any other part of the housing market,’ he added.
The index shows that the total amount of rent late or unpaid has improved marginally, despite higher rents. Total arrears in April were £282m, compared to £284m in March. This equates to 8.4% of all rent across England and Wales, compared to 8.5% of all rent in March.
‘Optimism is seeping in to the housing market, but from the top. For many tenants the monthly ebb and flow is still draining. Compared to inflation and expectations before the crisis, wages are still seriously under water,’ said Brown.
;Hence slower rent rises in April were a life raft for some. But for the tenants still struggling the most, it could be some time before their ship comes in. Landlords are lending a hand, and will need to keep taking up slack until the economy is on a more solid footing and improvements filter through to everyday wage levels,’ he concluded.