Rents in March reversed what was a four-month downward trend, according to the latest Buy-to-Let Index from LSL Property Services plc, which owns the UK’s largest lettings agent network.
Compared to February, the average rent in England and Wales rose by 0.5 per cent, to £735 per month. The return to growth leaves rents in March 4.2 per cent higher than a year ago, compared to 3.3 per cent annual growth in February.
Rents were higher on a monthly basis in six out of ten regions. The strongest growth was in London where a 1.3 per cent monthly rise took rents in the capital to a fresh record, averaging £1,106 per month. This was followed by the North East where rents grew 0.9 per cent compared to February, while in Yorkshire and the Humber rents increased by 0.6 per cent on a monthly basis. However, rents dropped the fastest in the South West, falling 0.5 per cent, followed by Wales where rents dropped by 0.4 per cent in a month.
Nine out of ten regions saw rents rise on an annual basis. London experienced by far the fastest annual increase, leaving rents in the capital 7.9 per cent (£81) more expensive than a year ago. Wales and the East Midlands both saw annual rental inflation of 3.9 per cent, while rents in the North East are now 3 per cent higher than in March 2012. The only exception to annual increases was the South West, where rents are still down marginally, dropping 0.2 per cent over the last year.
David Brown, commercial director of LSL Property Services, comments: “Winter staged a last-ditch counter offensive in March. But in spite of the unseasonal weather the rental market has gained some ground. Over the next few months it looks likely the spring bounce will continue. Of course, the regional picture remains more complicated. This month witnessed even more divergence between London and the rest of the country. But the overall picture is clear. With only modest improvements in the UK’s housing supply, rents will keep being forced upwards.”
The total annual return on a rental property rose to 6.3 per cent in March. This represents an average return of £10,329 with rental income of £7,751 and a capital gain of £2,578. The average yield on a rental property was 5.3 per cent in March, 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 10.9 per cent per property over the next 12 months – equivalent to £18,173 per property.
The total amount of rent late or unpaid has worsened to levels not seen since December. Total arrears in March were £284m, rising £36m from £248m in February. This equates to 8.5 per cent of all rent across England and Wales, compared to 7.4 per cent of all rent in February.
