Growth in buy-to-let landlords' rental income has fallen below the inflation rate, despite soaring tenant demand.
Since May, the average rent has risen by just £1 to £738 a month, according to the latest buy-to-let index from LSL Property Services.
This amounts to a monthly increase of just 0.2%. By comparison, in July 2012 rents rose by 1% on a monthly basis. The average rate of monthly rental inflation in July has been 0.9% since 2008.
Coming after rents saw no change at all in June, this means the average rent in England and Wales has risen by only one pound since May 2013. On an annual basis, this leaves rents 1.8% higher than a year ago – meaning the year-on-year increase has fallen below the rate of CPI inflation (2.8% in July).
The total amount of rent late or unpaid fell in July, with the amount of outstanding rent £7 million lower than in June. Total arrears in July were £273m, compared to £280m outstanding in June. This equates to 8.1% of all rent across England and Wales, down from 8.3% of all rent in June.
David Newnes, director of LSL Property Services, said: “This summer, the house purchase market has jerked into motion. And everyone is feeling the impact of that sudden change of gear. Buying a first home might only be possible for those with a big enough deposit and sufficient earnings, but the effects are reverberating through the rental market too. The supply of rental accommodation is increasing, while demand has softened slightly because of the improvement in first-time buyer numbers.
“In the medium-term we expect rents to at least keep up with wider inflation. Alongside the continued struggle for the majority of would-be first-time buyers, more tenants are entering the market. And this record demand is still confronted with a shortage of new homes to let. It’s also worth bearing in mind that the UK economy as a whole is still struggling with the same constraints on wages and inflation.
“However, every section of the economy is now building up a head of steam – and reigniting the property market is a natural part of that. It’s unlikely July will be typical after the initial change of pace in the purchase market, but a few months of more affordable rents are a win-win for everyone.”
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