The average residential rent across England and Wales is now £761 per month, some £3 higher than the previous record £758 set in October 2013, the data from lettings agent networks Your Move and Reeds Rains shows.
On a monthly basis August rents are on average 1.1% higher than was seen in July, an increase of £8 which leaves monthly rents 2.4% higher than a year ago. In absolute terms this annual growth represents an increase of £15.
‘Autumn is when more people move to take up new opportunities, to build new careers and to start new chapters. That is what the rental market is all about for many people by providing flexibility and it’s what it does well at a cost that’s risen in line with inflation for at least half a decade,’ said David Brown, commercial director of LSL Property Services.
‘No year is the same, and already 2014 has been like no other. The reawakening of mortgage lending startled the property market into a new spring of life earlier in the year. The benefits have been felt across the board, not just for first-time buyers but for tenants too. Investment means rents are now only 1% higher in real terms than at the start of 2010,’ he explained.
He pointed out that now that the independence vote is over in Scotland the main issue is over tenant fees. ‘Banning tenant fees in Scotland pushed up rents by £312 per year, or multiple times what a tenant would have paid at the start of a tenancy. Across every corner of Britain this should serve as a lesson in fully thought through policy making,’ said Brown.
A breakdown of the data shows that rents in seven out of 10 regions of England and Wales are higher than a year ago. This is led by the South West, where rents are up 3.5% on an annual basis, followed by the South East at 3.4%, and the North West with a 3.3% annual rise.
London was not in the top three, with annual rent rises of only 3% while rents in the North East are in fact 1.6% lower than a year ago, while the West Midlands and Wales experienced annual falls of 0.4% and 0.1% respectively.
On a monthly basis rents in the North East have by contrast matched London, with both seeing a 1.5% increase in rents since July. Only rents in the South East and the South West of England grew faster on a monthly basis, up 1.7% from July.
In total three regions are now seeing lower rents than in July. Alongside annual falls, rents in Wales and the West Midlands are lower on a monthly basis by 0.3% and 0.5%. However, the fastest monthly dip was in the East Midlands with rents down 1.1%.
As of August gross yields on the typical rental property in England and Wales stand at 5.1%, representing a fall of 0.2 percentage points from one year ago, down from 5.3% in August 2013. However compared to the previous month gross yields are up slightly from the 5% seen in July 2014.
The index also shows that taking into account price growth and void periods between tenants, but before costs such as mortgage repayments or maintenance, total annual returns on an average rental property stand at 12.7% over the 12 months to August. This is up from 6.4% in the year to August 2013, and an increase of 0.6 percentage points since July, when returns were 12.1%.
In absolute terms this means the average landlord in England and Wales has seen a return, before deductions such as mortgage payments and maintenance, of £21,239 in the last 12 months. This is made up of rental income of £8,233 and an average capital gain of £13,006.
Looking ahead, if rental property prices continue to rise at the same pace as over the last three months, the average buy to let investor in England and Wales could expect to make a total annual return of 17.2% over the next year, equivalent to £30,997 per property.
‘Landlords have benefitted from higher property prices, which is helping portfolios to expand and more homes become available to let. Gross rental yields are still in line with long run averages, and rental income is more reliable as personal finances gradually leave the great recession behind them,’ said Brown.
‘Meanwhile, the threat of interest rate rises is being held off by economies in the rest of the world marching to a slower tune. Landlords are seizing this cocktail of opportunities. And most critically when landlords boost profits by adding to the supply of homes, this keeps rent rises lower, and helps pass some of the benefits of these factors onto tenants,’ he added.
