Rents hit another record high in June, surging beyond the £700 per month barrier for the first time, says a new report out today.
The latest Buy-to-Let Index from LSL Property Services, which owns national chains Your Move and Reeds Rains, says that in June, the average asking price rent in England and Wales rose by 0.7% to £701 per month, surpassing the previous high of £696 in May.
With an annual inflation of 4.1%, the average rent is now £28 per month higher than June 2010. As a result of dipping house prices and increasing rents, the average yield reached 5.2% in June, up from 5.1% in May.
Over the course of the last year, London’s rents have climbed faster than any other region of England and Wales. In June, rents broke through the £1,000 per month barrier for the first time, reaching a new high of £1,006 per month – an annual increase of 6.9%.
The next biggest rises were in the North-East and the West Midlands where rents increased by 5.1% and 4.6% respectively. In the last year, average rents have only fallen in the East of England, where they fell by 0.3%, compared to an annual fall of 1.2% in May.
On a monthly basis, rents increased the fastest in the West Midlands and the East of England, rising by 2% and 1.6% respectively compared to May. Rents declined in three regions – the East Midlands, where they fell by 0.5%, the South-East and Yorkshire & The Humber, where rents fell by 0.2% and 0.1% respectively.
David Brown, commercial director of LSL Property Services, said: “Tenant demand continues to reach ever-higher peaks, and there simply isn’t enough rental property coming on to the market to match it.
“In areas like London where competition for rental property is most intense, it’s not unheard of for rental properties to be let within a day of coming on to the market. We’ve had five successive months of rent rises, but there is no sign of a let-up any time soon.
“Despite several new deals on the market, securing a big enough mortgage remains a tall order for the average buyer. The climbing cost of living and renting is impacting how much renters can save for their deposit, and demand will remain high in short-term.
“In the long-term, there is an even smaller chance of a significant slowdown. Just 102,570 new homes were completed last year – at a time when the UK’s population increased by nearly half a million. This trend shows no signs of slowing. Excess demand will be driven into the private rental sector, driving rents up further. Landlords thinking long-term will do well.”
LSL estimates that if property values continue on their current downward trend and rents on their current upward trajectory, a property investor could expect to make a total annual return of 2.3% over the next 12 months – equivalent to £3,776 per property.
Tenant arrears decreased for a second consecutive month, with 9.3% of all UK rent unpaid or late by the end of June – down from the 11.5% of rent unpaid or late in May. Unpaid rent totalled £257m across the UK in June, down 18% from £315m unpaid in the previous month.
However, LSL said that with rents rising so quickly, it expects arrears to rise in the coming months.
The LSL research was based on around 18,000 properties.
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