Posts Tagged ‘rents’

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Rents Continue To Rise

Friday, August 20th, 2010

The average UK rent is now £676, 2.3% higher than a year ago, according to the latest Buy-to-Let Index from LSL Property Services.

July saw the sixth consecutive monthly rise – 0.5% – following the increase of 1.4% in June. Rents are now just £12 per month shy of their peak two years ago. With the increase in rents, the average yield was 4.9% in July.

David Brown, commercial director of LSL Property Services plc, said: “Rents are still playing catch-up with the gains house prices made in the last year. The recovery in prices 12 months ago caused an exodus of accidental landlords from the market, ending the glut of supply of rental accommodation. Although house price rises have levelled off, landlords are still reaping the benefits of the constrained supply, and the improving yields have restored a healthier balance to the dynamics of property investment.

“And we don’t expect rents to fall away any time soon. With inflation well above the MPC’s target, interest rates can only go one way – north. When they rise, many landlords will face increased monthly mortgage repayments – and many will try to raise their rents to cover the difference.”

Arrears fell to 9.2% of all rent across the UK. This was a fall from 11.2% at the turn of the year, and is the lowest level since LSL Property Services plc began compiling the figures in 2008. In July, £212.9 million of rent was unpaid – a substantial drop from its peak of £361 million in August 2008. Just 434,803 tenants fell into arrears in July – 26,761 less than in June. The drop in arrears means that the average yield, adjusted for voids and arrears, was 4.5% in July – an increase from 4.4% in June.

Brown said: “There’s no evidence that the increase in rents has led to a surge in arrears. In fact as rents have risen in the past six months, arrears have steadily dropped. The key is the current tenant mix. Thousands of frustrated first-time buyers are staying for longer in the private rental sector. These tenants are in better financial state, and are better able to meet rising rents in full and on time.”

As a result of the recent declines in house prices, the total return from investing in buy-to-let over the last year dropped slightly to 10.1% in July. The average landlord would have made a total return of £15,961 in the past year, £8,706 in capital gains and £7,255 in rental income.

An investor buying property now could expect a total annual return of 3.5%, the equivalent of £5,838. The lack of house price inflation in the past three months means that if conditions remain constant, all of these gains will be driven by rental income, LSL says.

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Rising Rents Hit 2008 Levels

Friday, July 16th, 2010

The average rent across the UK increased 1% in June as constraints on supply boosted prices to their highest level since 2008, according to LSL Property Services.

LSL revealed that rents have risen for the fifth month in a row and are now 3.2% higher than a year ago. The average rent now stands at £673 per month, the highest price since November 2008.
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London lead the surge in June, with rents in the capital increasing 1.9% to an average £942, while rents in the North and North East rose 1.4% and 1.3% respectively.

However, the West Midlands saw a drop in rents of 1.7%.

Rental yields on buy-to-let properties have also been boosted up to 4.9% in June, as the average house price for the average rental property fell by 0.25% and the annual increase slowed to 8%.

The total return from investing in buy-to-let over the last year dropped slightly to 12.3% in June LSL found, as house prices come down. The average landlords would have made £18,983 in the past year, made up of £7164 in rent and £11,819 in capital gains.

Tenant arrears also fell to 10.1% of all rent in June compared to 10.7% in May, with £234m of all rent in the UK unpaid.

David Brown, commercial director of LSL, said: “The seasonal pick-up was exaggerated by the squeeze in the supply of rental accommodation. Although landlords weren’t clobbered as badly as feared, it is possible that some left the market in the run-up to the Budget and concerns over the new Capital Gains Tax rate dampened the number of new investors entering the market in June.

“But the restricted availability of buy-to-let mortgage finance has been the underlying factor holding back investment in the sector and the number of new rental properties hitting the market.”

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Rents Predicted To Rise 10% In Next Two Years

Monday, July 12th, 2010

York has been named the most affordable city in the UK to share a flat, according to flatsharing website Easyroommate.co.uk, as it forecast that rents will continue to soar along with rising demand.

Research by Easyroommate.co.uk showed that the average amount people will pay in York to rent a room is £270 per month or 14% of the average monthly wage in the city.

Easyroommate.co.uk compared rents and earnings across the 55 largest cities in the UK and revealed that the average UK rent is £348 per month or 16% of the national average monthly income.

Southampton was shown to be the least affordable city to rent in, with 27% of the average income of £1914 being spent on rent which comes in at an average £516 per month.

Despite London having the most expensive rent in the UK at £551 per month, proportionally, it comes in as the second leas affordable city. With the average income in the city clocking in at £2594, flatsharers are paying around 21 % of their wage on rent.

All five of the most expensive cities to rent in were located in the South East, with Southampton and London followed by Guildford (£505 per month), Cambridge (£418) and St. Albans (£410).

However, St Albans was found to be the third most affordable city to live in due to the average monthly income of £2932.

The three northern cities of York (£270 pcm), Stoke (£275) and Hull (£287) were amongst the cheapest cities to rent in.

Jonathan Moore, director of Easyroommate.co.uk, said: “There’s a clear split between the North and South, but the South East is looking increasingly like a separate market entirely. The squeeze in supply of properties has been felt more keenly in London and its outlying satellite towns, where demand is highest and rents are in London have soared to double those seen in York. For the price of renting a room in the South East, prospective flatsharers could rent whole properties elsewhere in the UK.”

Moore predicted that demand for flatshare will increase as first-time buyers continue to struggle to access mortgages and unemployment rises with public sector cuts.

He said: “We expect the monthly rents to rise by 10% across the UK over the next two years, with an increasing gulf between the rental market in the South East and the rest of the UK. But despite the imminent public sector job losses, the financial services sector shows signs of recovery and more jobs are becoming available in London. As demand for accommodation from young professionals grows, we anticipate the cost of room rental in London to top £600 per month.”

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Rising Rents Provide Boost To Landlords Threatened By CGT

Friday, June 18th, 2010

The average rent in the UK rose by 0.5% to £667 per month in May, according to the latest Buy-to-Let Index from LSL Property Services plc.

Rents have risen for four successive months, and are 2.7% higher than a year ago. The average UK rent is now £18 per month higher than May 2009.

Rents fell by 2.7% in the North East, and 0.2% in the North West, bucking the national trend. In contrast, London rents rose by 1% to £924, whilst the West Midlands recorded a rise of 2.1% to £540 per month.

Yields on buy-to-let properties remained at their highest level since December 2009 at 4.8%, as rents accelerated faster than house prices. The house price for the average rental property snicked up by 0.1% compared to April, and registered an annual increase of 8.6%.

David Brown, Commercial Director of LSL Property Services plc, comments:

“House price increases have steadied, and rental income is now accounting for an increasing portion of a landlord’s total return. Rents have continued their upwards climb and are just £21 short of their all-time high.

“With the government likely to raise capital gains tax, capital gains may no longer be taxed more lightly than rental income. These measures could reduce the attractiveness of investment in the private rented sector, which would be a step backwards from financing the UK’s housing shortfall.

“But such a move would at least encourage landlords to take a more balanced view of rental income and capital gains in the sector. Total annual returns are being boosted by strong capital gains, but it is rental income that makes an investment plan viable and pays a landlord’s mortgage.”

The total return from investing in buy-to-let over the last twelve months hit 13.2% in May, rising from 12.8% in April. The average landlord would have made £20,363 in the past year, a combination of £7,100 in rent and capital gains of £13,263.

With house price growth now having levelled off, a landlord investing today could expect to make an annual return of 5.4% over the next twelve months. This is equivalent to £9,096 on a typical property in the UK. The majority of this would be in income rather than capital gains.

Tenant arrears grew in May, as £244m of all rent in the UK was unpaid – a sharp increase of £24m from April. This represents 10.7% of all rent. 508,600 tenants owed rent in May, an increase from 465,500 in April.

David Brown continues:

“Tenant finances have been in improving shape in 2010 and this drop highlights just how far they have come since the downturn. With the final three days of May falling on a bank holiday weekend, many payments were delayed until the Tuesday, leaving many landlords waiting into June for their rents. Even with this anomaly, arrears are 1% lower than the same time last year.

“The fundamentals of sound property investment, tenant demand, yield and rental income, are in place for the buy-to-let recovery to continue apace.

“But we need to wait for the budget. If the government proceeds with its short-sighted plan to impose a higher Capital Gains Tax on the private rented sector, it will risk bringing the recovery to a juddering halt – especially if neither taper relief nor indexation allowance accompany the hike.

“Without either of these, the new tax would penalise sustainable long-term investment, deterring private landlords and institutional investors alike.”

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Landlords Seeing Rising Rents

Friday, June 18th, 2010

The average rent in the UK rose by 0.5% to £667 per month in May, according to the latest Buy-to-Let Index from LSL Property Services plc.

Rents have risen for four successive months, and are 2.7% higher than a year ago. The average UK rent is now £18 per month higher than May 2009.

Yields on buy-to-let properties remained at their highest level since December 2009 at 4.8%, as rents accelerated faster than house prices. The house price for the average rental property increased by 0.1% compared to April, and registered an annual increase of 8.6%.

LSL Property Services plc owns a large lettings agent network, including national chains Your Move and Reeds Rains.

David Brown, commercial director of LSL Property Services plc, said: “House price increases have steadied, and rental income is now accounting for an increasing portion of a landlord’s total return. Rents have continued their upwards climb and are just £21 short of their all-time high.

“With the government likely to raise capital gains tax, capital gains may no longer be taxed more lightly than rental income. These measures could reduce the attractiveness of investment in the private rented sector, which would be a step backwards from financing the UK’s housing shortfall. But such a move would at least encourage landlords to take a more balanced view of rental income and capital gains in the sector. Total annual returns are being boosted by strong capital gains, but it is rental income that makes an investment plan viable and pays a landlord’s mortgage.

“The fundamentals of sound property investment – tenant demand, yield and rental income – are in place for the buy-to-let recovery to continue apace. But we need to wait for the budget. If the government proceeds with its short-sighted plan to impose a higher Capital Gains Tax on the private rented sector, it will risk bringing the recovery to a juddering halt – especially if neither taper relief nor indexation allowance accompany the hike. Without either of these, the new tax would penalise sustainable long-term investment, deterring private landlords and institutional investors alike.”

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Rents Exceed Mortgage Repayments

Tuesday, June 15th, 2010

Research by Santander showed that buying a property is now cheaper than renting in every area except London, with would-be buyers outside the capital able to save an average of £1040 a year by owning their own property.

The average monthly rent in the UK, excluding London, is now just over £420 compared to monthly mortgage repayments of £334 for the average first-time buyer.

Only people living in the capital are better off by continuing to rent, despite rental prices being roughly 56% higher than the rest of the UK at £701 a month. To buy, first-time buyers in London face paying an extra £359 a month.

The savings to be made by buying as opposed to renting have increased 67% in the last six months from a saving of £52 a month last October to £87 now.

Phil Cliff, director of mortgage marketing at Santander UK, said: “People have been justifiably cautious in approaching the housing market in recent months but this research strongly supports the idea that in the majority of cases owning can be less expensive than renting.

“The now average LTV of 75% for first-time-buyers has provided an obstacle in some cases but saving for a deposit is clearly a wise move. Lenders are also looking to offer higher LTV products, while the Government’s announcement that it will help boost the number of new homes is all positive news for those wishing to take their first steps on the property ladder.”

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Rental Market – Rents Rise While Arrears Fall

Friday, April 16th, 2010

It has been claimed that a “resurgent” buy-to-let market is delivering improved returns as rents rise.

The latest buy-to-let index from LSL Property Services found that tenant arrears hit a new low with ’only’ £227 million rent going unpaid, compared to its peak of £361 million in August 2008.

The average rent in the UK rose 0.1% in March to £659 per month, increasing for the second consecutive month, an increase of 1.5% compared to a year ago. But rents remain 4.0%, or £29 per month, lower than their peak level in August 2008. Yields on buy-to-let property dropped slightly to 4.7% from 4.8% in February as house prices continued to rise, outpacing increases in rents.

Tenant finances were in their best shape in at least two years, with arrears dropping to just 10.1% of all rent. This was a fall from 11.2% at the turn of the year, and is the lowest level since LSL Property Services plc began compiling the figures in 2008.

LSL Property Services plc owns the UK’s largest lettings agent network, including national chains Your Move and Reeds Rains.

David Brown, commercial director of LSL Property Services plc said: “We’re not just seeing an improving picture for landlords – but tenants too. The performance of arrears was a surprise story of the recession, and they have exceeded expectations again in the first quarter of 2010. The economy is recovering – albeit ponderously. Fewer tenants are losing their jobs, or seeing pay-cuts and falling behind with their rent. The improved situation with tenant arrears has meant that although house prices have risen, when void periods and arrears are considered, the effective yields landlords receive on property investment have actually snicked-up in the past month in real terms.”

The total return from investing in buy-to-let over the last 12 months reached 13.3% in March, with the average landlord making a total return of £20,580 in the past year. Total annual returns have now risen for 13 consecutive months.

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Rents Continue To Rise As Supply Shrinks

Monday, March 29th, 2010

Asking rents increased by 0.7% in March to £820pcm from £814pcm in February, reveal the results from the latest FindaProperty.com Rental Index

Average rental values are now just 0.8% (£7pcm) lower than a year ago (£827pcm). The supply of properties available to rent fell 4.2% in the last month and 7.6% since January. Properties let within 57 days in March – 2 days faster than last month. Gross rental yields remain steady at 4.5%. Five of the eleven UK regions experienced a monthly increase in asking rents, with the highest being in the South East (+2.3%), both Yorkshire and the Humber and Wales remained stable while the remaining four regions experienced a decline.

Asking Rents Rise Again

March saw the second consecutive month of rising asking rents, which are now £16pcm higher than in January, and at £820pcm are now at the same level as in December last year. The annual rate of decline has reduced, with the year-on-year change now standing at just -0.8%, the lowest annual decline since the index began. Rents sought by landlords are now just £7 lower than a year ago.

Further Tightening Of Supply In Rental Market

The firming of rents has been underpinned by a reduction in the availability of rental properties on the market, which are now at the lowest level since October 2008. This is in marked contrast with an oversupply of rental properties for the majority of last year when the market was flooded with new rental properties by sellers who were unable to sell: “accidental landlords.”

These accidental landlords, encouraged by rising prices and strong demand, are now returning to the sales market, a major cause for this tightening of stock levels.

Tenant Demand Is Strong

The latest RICS Lettings Survey shows that tenant demand remains positive with 16% more respondents seeing demand rise rather than fall. Would be first-time buyers, unable to get a foot on the property ladder, are still a major source of increasing demand for good rental properties.

Even-footing Between Landlords And Tenants

The lower level of stock and strengthening of rents is an indication that the rentals market is gradually returning to equilibrium. With less surplus stock and rents now starting to rise modestly, there is more balance between landlords and tenants, and less scope for either party to dictate the terms of a tenancy.

Rents Increase For Both Property Types

The supply of houses available to rent fell 6.9% in March to the lowest level since August 2008. This pushed rents for this type of property up 0.7% to £846pcm. The stock of flats to let also fell this month, by 2.7% and is at its lowest level since December 2008. This has pushed asking rents for flats up 0.8% to £767pcm, the highest they have been since February 2009.

Mixed Picture In The Regions Led By The Supply/Demand Imbalance

There remains a mixed picture in the regions with five showing increased asking rents, two remaining stable and the remaining four with declines. However, this regional variation is very much down to the current supply-demand imbalance specific to each area of the UK.

Nigel Lewis, property expert at FindaProperty.com, commented:

“The rental market is settling down following two years of turbulence. While rents are still a long way off the peak of £873pcm in March 2008, they are slowly rising as a lack of homes for rent coupled with strong demand begins to drive higher returns for landlords over the course of the year.”

Strong Rental Recovery In The Capital

Asking rents rose 0.7% in London in March, the seventh month of steady or rising rents. Rent levels are now 2.1% higher than they were 12 months ago. This rise in rental values can largely be attributed to the exit of accidental landlords and surplus stock from the market.

Supply in the capital has been steadily declining following the severe oversupply last summer, with the number of properties available to rent now 31% lower than in August 2009.

Nigel Lewis, property expert at FindaProperty.com, commented:

“London continues to lead the overall national recovery in the rental market, with seven months of rising or stable rents. The sustained tightening of supply, coupled with the difficulties in getting onto the property ladder for first-time buyers in the Capital means that rents are likely to continue increasing in the coming months.”

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Rents Rise In February

Thursday, February 25th, 2010

Following two months of declining rents over the festive period and New Year, rents increased 1.2% to £814pcm in February from a low of £804pcm, reveals the latest FindaProperty.com Rental Index

While asking rents remain 1.9% lower than last year, this substantial monthly rise is a positive sign for the rental market.

The increase in rental values can largely be attributed to tightening supply, with the number of rental properties available on the market declining 3.6% in the last month, the lowest they have been since November 2008.

One explanation for the decline in supply may be the revival of activity in the sales market, which has encouraged reluctant landlords to sell previously rented properties. Another is that there are fewer new entrants to the rental market. New buy-to-let lending increased in the second half of 2009 according to the Council of Mortgage Lenders; however this is still significantly short of where the market was in 2008.

While new buy-to-let lending has gone up, this has not yet translated to new properties in the market, and the question mark over buy-to-let regulation is another deterrent for would be landlords.

Houses Bounce Back While Flats Continue Steady Growth

Following two months of falling rents, house rental values increased by 1.3% in February to £840pcm from £829pcm in January. Prices remain 2.3% lower than a year previously (£860pcm). The rise in asking rents can largely be attributed to the 7% fall in the supply of houses available to rent, resulting in increased competition between tenants for this type of property.

Flats continued their smooth upward trend with a 1.2% increase in asking rents, the fourth month of rising or stable rents. The average flat rental is now £761pcm, the highest asking rents have been since March 2009. Rents for flats are now just 1% lower than a year ago (£769pcm).

The supply of flats for rent on the market continues to tighten, with a 2% fall in February. Stock of flats is currently at the lowest level since December 2008.

Steady Returns For Landlords

Average gross rental yields have largely stayed around the 4.5% mark for the past ten months, despite fluctuations in both asking rents and prices in the sales market. The returns vary across the UK, with Scottish landlords continuing to receive the highest returns.

Nigel Lewis, property expert at FindaProperty.com, commented:

“Fewer homes coming on to the market drove an increase in asking rents this month as properties were outnumbered by potential tenants. Although an average rise of £10 in one month may seem high, it’s from a low base and rents remain the lowest we have experienced in years.

“Buy-to-let mortgage lending remains low but it is rising and we expect this trend to continue as confidence returns to the rental market. Also, a shortage of property both for sale and to rent will continue to drive up rental income this year, making this sector attractive to landlords.”

Rents Increase Or Remain Stable In All UK Regions

The northern regions recorded the highest increases, with rents in the North East rising 5.5% to £619pcm from £587pcm a month previously. This is the second consecutive rise for the region and takes average rents up to their highest level since August 2009.

The North East was followed by substantial increases in Scotland (2.5%) and the North West (2.3%). Rents in the North West are also performing the best when compared to last year. At £615pcm, these are 3.9% higher than they were in February 2009 (£592pcm).

All other regions also recorded rental increases with the exception of the South West of England, where rents remained steady at £797pcm. This stability is good news for the landlords in the South West, who currently receive the lowest returns of any region, with average gross rental yields of just 3.99%.

At 0.3%, Wales recorded the smallest increase in rental values of the UK regions, taking average rents to £647pcm; however this is the third consecutive rise for the region. While rents increased by 0.9% to £535pcm in Yorkshire and the Humber this month, they remain far below the level being charged last year. Average asking rents in the region in February 2009 were £595pcm, £60 or 10.1% higher than current prices.

Nigel Lewis, property expert at FindaProperty.com commented:

“Northern rents performed particularly well this month, leading the overall market recovery but February was positive for all UK regions in terms of rental values, with all parts of the UK recording increasing or stable rents.

“This very much follows the national trend and could well signal a turn for the rental market as a whole. Next month’s data will offer a clearer picture on whether this month’s positive data is set to be a continuous state of affairs across the market.”

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Rent Rises Expected In 2010

Tuesday, December 29th, 2009

Surveyors are expecting Landlord’s and Letting Agents to see rent rises in the New Year as the number of new instructions has fallen for the first time since January 2008.

Royal Institution of Chartered Surveyors (RICS) Residential Lettings Survey Q3 2009: Key Points

A net balance of 16 per cent more surveyors reported a rise in new tenant lettings in the three months to October compared with 11 per cent in the previous three months.

Within this, demand for houses to rent picked up particularly sharply, with the positive net balance jumping from six per cent to 22 per cent. Meanwhile, the net balance of respondents recording a rise in demand for flats to rent was unchanged, albeit still in positive territory, at 12 per cent.

More significantly, the new instructions net balance has fallen for the first time since the early part of 2008, with 11 per cent more surveyors seeing a rise rather than a fall in new rental instructions. Accordingly, downward pressure on rents appears to be easing, with 22 per cent more surveyors expecting average rents to rise rather than fall in the next three months.

London is leading the turnaround in rental expectations followed by the North and the South East of England.

“Oversupply is Reversing”

RICS spokesperson Jeremy Leaf commented: “It seems the current upward trend in the housing market is having a more significant effect on the lettings market, with many of the accidental landlords returning to the sales market to take advantage of the recent price increases.

“As a result the recent oversupply is reversing, with new instructions at the lowest levels we have seen. This, of course, is impacting on rental prices, and tenants no longer have as strong a bargaining power as they did.”

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