Rents across England and Wales are at the second highest level on record, according to the latest Buy-to-Let Index from LSL Property Services plc, which owns the UK’s largest lettings agent network, including national chains Your Move and Reeds Rains.
The average rent in England and Wales reached £743 per month in August, after a monthly increase of 0.7 per cent. This acceleration in August compares to July when rental inflation was much lower, at 0.2 per cent month on month.
On an annual basis, this leaves rents 1.3 per cent higher than a year ago, and only £1 behind the all-time record high set in October 2012.
Meanwhile, the pace of new lettings accelerated in August, as the number of new tenancies across England and Wales increased by 8.8 per cent compared to July. On an annual basis, there were 13.7 per cent more new tenants in August than in August 2012.
Eight out of ten regions saw higher rents in August. Rents in the South East rose the fastest of all, up 2 per cent, while Welsh rents were 1 per cent higher. The third fastest monthly rise was in the North West, with rents rising 0.9 per cent compared to July. By contrast, rents in the North East fell by 0.8 per cent in August, while the average rent in the East Midlands was 0.3 per cent cheaper than the previous month.
On an annual basis, five regions out of ten have seen rents rise in the last twelve months. By a significant margin, London saw the fastest annual increases, with rents up 4.8 per cent in the last year. This was followed by Wales, where rents are 2.3 per cent higher than twelve months ago, while the East Midlands saw the third largest annual rise, with rents up 0.9 per cent since August 2012.
By sharp contrast rents in Yorkshire and the Humber are 1.6 per cent lower than in August 2012, followed closely by a 1.5 per cent annual fall in the North West, while rents in August were 1.0 per cent lower than a year ago in the West Midlands.
David Brown, commercial director of LSL Property Services, comments: “The summer saw a step-change for first time buyers. Better availability of finance has allowed some households to leave the rental market. And rents certainly felt the short-term impact of that. But releasing a blast of that pent-up pressure to buy a home is unlikely to change the long-term trend to renting.
“Although government schemes are helping, buying a first home is still extremely hard on the back of low salary growth. As hundreds of thousands of new households look for homes, it’s increasingly private renting that’s absorbed the pressure. Autumn brings the seasonal peak for the rental market, in part due to the spike caused by student renters, and the sheer volume of lettings activity shows demand this year is as strong as ever.”
If rental property prices continue to rise at the same pace as over the last three months – which with renewed housing market activity has been at higher levels – the average buy-to-let investor in England and Wales could expect to make a total annual return of 13.1 per cent over the next 12 months, equivalent to £22,065 per property.
