Rents in April increased to the highest level since November 2012, according to the latest Buy-to-Let Index from LSL Property Services plc.
The average rent in England and Wales has risen by 0.2 per cent since March, to £736 per month. Continued growth leaves rents in April 3.9 per cent higher than a year ago, almost as fast in March when rents were 4.2 per cent higher year-on-year.
For the first time since November 2011, every region of England and Wales has seen rents rise on an annual basis. The strongest increases were in London, where rents are 7.6 per cent higher than a year ago, followed by annual rises of 5.0 per cent in Wales and 4.1 per cent in the East Midlands. While the South West was the only region to see annual falls in March, this reversed in April, with annual rent rises of 0.5 per cent.
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 per cent from the month before. This was followed by the North East and the South West where rents posted a 0.5 per cent gain in both regions. Meanwhile, rents dropped the fastest in Wales, falling 0.3 per cent. The second region to see a monthly fall was the North West, with rents in April 0.2 per cent lower than a month before.
David Brown, commercial director of LSL Property Services, owners of estate agents Reeds Rains and Your Move, comments: “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. 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 per cent in Wales will be keenly felt. Landlords across the UK have increased the stock of rental properties by around 10 per cent since 2008 – but the more fundamental squeeze is still coming from a lack of new building.”
The total annual return on a rental property rose to 5.9 per cent 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 per cent in April, compared to 5.2 per cent 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 cent per property over the next 12 months – equivalent to £9,496 per property.
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 per cent of all rent across England and Wales, compared to 8.5 per cent of all rent in March.
