Posts Tagged ‘rises’

Rent rises drive strong buy-to-let yields

Monday, March 26th, 2012

A 4.8% growth in the average monthly rent led buy-to-let investors across the UK to achieve a rental yield of 6.1% in 2011, according to new figures from BM Solutions.

Strong demand for rental properties increased further last year, with the average monthly rent climbing to £716 in 2011 from £682 in 2010 as a result.

BM Solutions reported that while 2011 rental yields were marginally lower than the previous year (6.2%), they remained buoyed by continued rental increases across the UK. Regionally, the highest rental yields in 2011 were in the North (7.0%), North West, Yorkshire and the Humber (both 6.3%), Wales (6.0%), West Midlands and the East Midlands (both 5.9%). Greater London (4.8%), South West (5.0%), South East (5.2%) and East Anglia (5.3%) all registered yields below the UK average.

Phil Rickards of BM Solutions said: “There is a very healthy demand for rental properties across the UK right now, which in part may be driven by the costs associated with buying a home: costs which, for some, will only increase as the stamp duty holiday comes to an end. Average gross yields on a buy-to-let property have been just over six per cent for the past two years, driven by growth in rental values.

“However, with house prices likely to remain broadly flat again this year, buy-to-let landlords can again expect little capital gain on their investment in 2012.”

While the national average monthly rent increased by 4.8% overall, there are more significant gains in regional areas. The largest increases were in East Anglia (8.0%) and the North (6.9%). The South East and Greater London recorded rises of 5.8% and 5.6% respectively. In contrast, rents increased by less than 1% in Wales (0.1%) and Scotland (0.7%).

The average rent in Greater London remains significantly higher than elsewhere in the UK, at £1,212 per month. The average monthly rent in the capital is 69% higher than UK average of £716 and 41% above that in the South East (£858) – the next highest region. The lowest average rents are in Wales (£474 per month), the North and Yorkshire and the Humber (both £488 per month).

First ever rent rises in January; Tenant arrears at 10.7%

Friday, February 17th, 2012

The rental market sprang back into life early this year, increasing 0.1% to £712 per month and the first rise in three months.

However, rental arrears hit a high of 10.7%, reflecting the poor economic backdrop.

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Annual rental inflation increased to 4.3% from 4% in December, a £30 rise in the average monthly rent in the past year, according to figures from LSL Property Services.

Rents rose the fastest on a monthly basis in the West Midlands and South West, where they increased by 1.8% and 1.5% respectively.

In London, rents rose by 0.8%, where they have only fallen once in the past 13 months. However, rents fell in four regions, with the biggest declines in the East of England and Wales, where they fell by 1.7% and 1.5% respectively.

London recorded the highest annual rental rises at 6.3%, followed by the East of England where rents rose by 5.9%, but fell in the North East by 0.7%

David Brown, commercial director of LSL Property Services, said the depth of the underlying demand for tenancies over Christmas brought greater competition for rental property and halted the usual downward pressure on rents.

“In January, activity has already moved up a gear in many parts of the UK, pushing rents up once more in a small, but significant rise,” said Brown.

“Mortgage lending has shown signs of improving in recent months, but transactions remain at almost half their historic levels, and the increasing dependency on rental accommodation will drive further rent rises over the long-term.”

Tenant demand continues to rise

Wednesday, October 12th, 2011

Paragon has reported that tenant demand continued to rise during the third quarter of 2011.

The specialist buy-to-let lender’s Private Rented Sector Trends Report found that 44% of landlords said tenant demand increased during the third quarter and just 4% thought it declined.

When asked for their views on tenant demand for the next 12 months, 49% of landlords said they expect tenant demand to continue to increase.

34% of landlords reported an increase in rental income, with only 4% saying that it had decreased. Of those landlords who achieved an increase in Q3, 11% said it was between 2% and 4%.

Paragon found there has been a shift in the types of properties that landlords are looking to purchase. Terraced houses were the most popular choice at 41% followed by flats (35%) and then bungalows – which have surged in popularity from 2.7% in Q2 to 10% in Q3.

Nigel Terrington (pictured), chief executive of Paragon, said: “Tenant demand has continued to increase for a third quarter, which is perhaps not surprising considering the current squeeze on the UK housing market as a whole.

“More people than ever before are relying on the private rented sector so it is positive to see that landlords are looking to invest in their portfolios and are also diversifying the types of property in which they are investing in order to meet tenant demand.”

Rent rises accelerate

Friday, September 16th, 2011

Rents recorded their largest monthly increase in a year in August, according to the latest Buy-to-Let Index from LSL Property Services.

In August, the average rent in England and Wales rose by 1.2% to £713 per month, surpassing the previous record high of £705 in July. This is the largest monthly increase since August 2010. With annual inflation at 4%, the average rent is £27 pcm higher than August 2010. The average yield was 5.2% in August.

On a monthly basis, rents increased fastest in Wales and the South East, where they rose by 2.1%. The next biggest increases were in London and the South West, where they rose by 1.5% and 1.3% respectively. Rents only declined in the Midlands compared to July, falling by 0.4% in both the West Midlands and the East Midlands.

In the last year, London has seen stronger rental inflation than other regions of England and Wales, with rents hitting a new record high of £1,025 per month in August. This is an annual growth of 6.6% – equivalent to £63 per month. The next biggest annual increases were in the West Midlands, where they rose 6% and the North East, where they increased by 4.3%. In the last year, average rents have risen in all regions except Yorkshire and the Humber, where they have fallen by 0.5%

David Brown, commercial director of LSL Property Services, said: “We are in the thick of the busiest time of year for the rental market, and red-hot demand for properties is driving rents up at their fastest monthly pace in the last 12 months. Recent graduates moving for their first jobs have further exaggerated the long-term and growing demand from frustrated buyers. In the last two years, average rents have risen by more than £50 a month.

“With significant improvement in the number of buyers able to secure a mortgage unlikely in the foreseeable future, competition for rental accommodation will not drop and further rent rises remain on the cards.”

LSL said that the total annual returns on a rental property improved in August after annual decreases in property prices slowed. The average total annual return in August was 2.6%, the equivalent of £4,336 – £7,626 in rent, with a capital loss of £3,290. If property values maintain the same trend as the last three months, a property investor could expect to make a total annual return of 10.5% over the next 12 months – equivalent to £17,381 per property, LSL said.

Brown said: “Total annual returns took a turn for the better in August, following an uptick in rental property values in the past few months. However for landlords able to invest in London, the returns are looking even stronger. With house prices in the capital outperforming the rest of the UK, the average London landlord would have made an annual total return of nearly £15,000 in August.

“Nevertheless, it is rental income and yields that are tempting new property investors to the market, rather than thoughts of immediate capital gains. In fact, yields on rental properties are much stronger than in many other types of investment. With these fundamentals looking so attractive for long-term investment strategies, a sustained increase in buy-to-let lending would help meet the growing demand from would-be investors – and allow the sector to expand to match the increasing demand from would-be buyers.

However, tenant arrears increased for the first time since April, with 10.7% of all UK rent unpaid or late by the end of August – up from the 9% of rent unpaid or late in July. Unpaid rent totalled £300 million across the UK in August, up 19.5% from the £251 million unpaid in the previous month.

Brown said: “The holiday season often takes its toll on tenant arrears, with many households squeezed by summer holiday spending. While we expect arrears to fall back into line in the short-term, the growth is indicative of the mounting pressure facing tenants. With rents rising so quickly, soaring inflation and an uncertain economic outlook, over the long-term we anticipate that rental arrears will become a growing financial problem for landlords.”

Tenants Face More Rent Rises As Stock Falls Further

Wednesday, July 7th, 2010

“The new budget may lead many to consider delaying their first steps onto the property ladder and, as more people rent, this will put more pressure on the lettings sector.

“A small number of properties came on the market during the second quarter but overall stock levels are still down. Demand is likely to outstrip supply for a while yet and rents will keep being pushed up as a result.”
Nigel Lewis, Head of Content Findaproperty

• Asking rents have risen 2.3% since the end of Q1 from £820pcm in March to £839pcm in June

• Stock levels have fallen in Q2 compared to Q1 of 2010 – the number of rental properties available on the market in June is 2.7% lower than in March

• Rental yields have increased from 4.53% in March to 4.57% in June

• Rents sought by landlords are now £16pcm higher than a year ago

Buy-To-Let Will Remain A Strong Investment, Even If CGT Rises

Monday, June 14th, 2010

Leaders, a UK letting agent, are confident that buy-to-let will remain a popular investment option, even if the rate of Capital Gains Tax (CGT) rises.

CGT is currently set at a flat rate of 18 per cent but there has been widespread speculation that this will be converged with Income Tax bands at 20, 40 or even 50 per cent under the new coalition government.

Leaders’ managing director, Paul Weller, says:

“The potential of buy to let to provide an annual rental yield, as well as to provide capital gains in the long-term, has long appealed to a wide range of investors and will continue to appeal as an enduring asset class.

“We do not believe landlords will act hastily in the face of a possible CGT rise. They know that buying to let is a long-term investment which brings with it a good chance of a capital gain – unlike many other assets classes – and after all, a taxed gain is better than no gain or a loss. Besides, assets other than property that achieve capital growth will also be subject to CGT.

“At the same time, with rents now rising as they are because of high demand, the income earned through property is likely to be much higher than derisory interest payments on any cash realised through selling an investment property, particularly as only the net proceeds after any CGT will be available to invest. Interest rates are currently around 1% whilst rental yields of 6% are now achievable.”

Mr Weller also points out that CGT only dropped to the current rate of 18 per cent in 2008; prior to that, when many landlords began investing, it was significantly higher.

For any landlords considering whether they should cash in on their investment ahead of a potential CGT rise, Leaders advise caution.

Mr Weller continues:

“Firstly, you need to consider where else you would put your money right now. As well as interest rates being so pitifully low, stocks and shares are no more enticing; you only have to look at what is happening to BP, a blue-chip British company whose share price has almost halved over the last 6 weeks, and who may consider suspending dividend payments. Property values tend to rise over the long-term making bricks and mortar a more solid investment.

“Secondly, your rental property may have increased in rental value over the last few years; we have seen rents gradually rising and if you have been renting your property for some time and not had it valued recently you may be pleasantly surprised by the rent it can command in the current market.

“At Leaders we will be happy to give free, impartial and expert advice on your property’s rental value and we are not conflicted by the possible sales fee an estate agent may be considering if your property is sold.

“Thirdly, for anyone thinking about selling their property before any CGT rise and then re-investing in a new buy-to-let property, they need to bear in mind the dual transaction costs and stamp duty that may be payable on the new property. Any potential savings on CGT would need to outweigh these costs to make this course of action worth taking.”

Whilst Leaders does not believe that an increase in the CGT rate will cause sensible landlords to dismiss buy-to-let or cash in their chips, the firm is concerned about the disconcerting short-term effect the uncertainty of a possible rise is having on the market, which currently needs more investment.

Mr Weller adds:

“We have written to the Housing Minister ahead of the Emergency Budget on 22nd June urging the government to dispel the uncertainty over CGT and to give careful consideration to the UK’s private landlords.

“The Private Rented Sector (PRS) currently accommodates 13% of UK households and needs nurturing if it is to continue to provide a good choice of homes to the millions of people who either choose to rent, or rent because they are unable to buy. We are seriously concerned about the current shortage of good quality property available to rent and urge the government to do all it can to encourage new investment in this sector.”

Mr Weller points out that with demand outstripping supply, rents are rising and more tenants and would-be tenants are finding rents increasingly unaffordable. This situation will worsen if investment in the sector is not encouraged.

Mr Weller concludes:

“If there is to be an increase in CGT we would urge the government to ensure that suitable concessions are introduced alongside. Many private landlords are not wealthy people, but ordinary individuals who have chosen to invest in property to provide for their retirement so that they will not be a burden on future taxpayers.

“It would be wrong for them to be penalised by the tax system for doing so. If CGT rates do rise then appropriate concessions, such as generous taper relief, that will support long-term investment are essential.”

Many Tenants Bracing Themselves For Year Of Rent Rises

Thursday, May 27th, 2010

Many tenants bracing themselves for year of rent rises

Renters’ inability to get onto the housing ladder continues to put pressure on the rented sector, with more tenants forecasting a resultant rise in rents, reveal Rightmove.

40% expect rents to be higher in 12 months’ time, a significant increase on the 27% who forecast rises in Q2 2009.

Miles Shipside, commercial director at Rightmove, comments:

“Tenants are as close to the coal face as you can get, and their growing view is that rents are on the way up. With tenants staying in properties longer, and fewer landlords expanding their portfolios, supply is being outstripped by demand in many areas and higher rents are the likely outcome. Tenants’ sentiments in this survey are spot on.”

Our survey also reveals that the movement from the rental sector into owner occupation is at a virtual standstill. The Rightmove Consumer Rental Forecast a year ago recorded 58% of those surveyed stating they would like to buy but could not afford to, compared to 59% now.

On a regional level, the South East (64.2%) is most affected by affordability issues and the West Midlands (53.5%) the least.

Miles Shipside adds:

“The on-going mortgage famine has meant a consistent demand by lenders for substantial deposits over the last year and there is a strong correlation between this and the frustrations of would-be first-time buyers unable to get on the ladder. It is unlikely these figures will change until lenders can access much more wholesale funding, or potential borrowers can save up the bigger deposits required.”

One positive effect of the likely increase in rents is that the improved returns on landlords’ property investment portfolios, could lead to them buying more. While finance remains restricted in the buy-to-let sector, higher rents could persuade more lenders that investing in professional landlords is now a safer bet.

Shipside continues:

“Professional landlords are canny investors, and will be assessing what returns they can earn in property versus other investments. With cash in the bank earning low returns, this forecast rise in rents could drag more landlords in.

“They are badly needed to help satisfy growing rental demand, but are likely to be sitting on their hands at the moment till there is greater clarity on the new Governments Capital Gains Tax proposals.”

The new Capital Gains Tax proposals present an interesting dilemma for the new Coalition Government. With a pressing need to address the record deficit, there is widespread speculation that the existing flat rate of tax on gains on non-business assets will be increased and brought closer in line with higher rates of income tax. Such changes will not be helpful to the health of the rental sector.

Shipside summarises:

“At a time when we are heavily reliant upon the rental sector to satisfy the nation’s housing needs, the likely changes to Capital Gains Tax rates will seem like pretty bitter tasting medicine to many existing landlords. It will also look like a pill that many would-be landlords will be unwilling to swallow, at a time when rental returns are looking more positive.”

Rent Rises Expected To Be Strongest In London

Wednesday, March 24th, 2010

According to the latest survey of the lettings market in the UK, from the Royal Institution of Chartered Surveyors, rents are expected to rise for the first time since July last year. The drop-off in properties coming on to the rental market was cited as the main reason for the change. The survey states that demand for rental property is strongest in London.

UK Rental Sector Rises By 1m in 10 Years

Monday, March 1st, 2010

The Communities and Local Government’s English Housing Report, published this week, shows that the number of households renting privately has risen by one million since 2001, from 2.1 million to 3.1 million in 2008-09.

The Private Rental Sector now accounts for 14.2 per cent of all households in England, up from 12.7 per cent in 2007 and 10.1 per cent in 2001.

The report also revealed the number of owner-occupier households decreased from a peak of 14.8 million in 2006 to 14.6 million in 2008-09.

The proportion of households in owner-occupation has been in decline since 2003, falling from 70.9 per cent to 67.9 per cent during the period. The proportion of social renting households is also in decline, falling from 19.5% in 2001 to 17.7% in 2007, although there was a slight pick-up to 17.8% in 2008-09.

Of those surveyed, 41 per cent of private renters rely on the PRS for their long-term housing needs and have no intention of purchasing a home. One-person households are the most common type of household in the PRS (30%), followed by couples without children (25%) and couples with dependent children (17%)

The PRS provides housing for a wide range of age groups – 48 per cent of private renters are aged 34 or under, with 22 per cent in the 35-44 age group, 12 per cent in 45-54 group and 16 per cent over the age of 5. The survey also showed a diverse economic status, with 61 per cent of households in full-time employment, nine per cent in part-time work, five per cent unemployed, nine per cent are retired and 17 per cent are classed as ‘other inactive.’

Nigel Terrington, Paragon Group chief executive, said: “The CLG’s figures highlight the diverse range of households who call the private rented sector home. The sector’s importance to the UK’s housing needs is growing annually as increasing numbers of people decide to rent – owner-occupation has been in decline since 2003 and we believe that this trend will continue as potential buyers are either unwilling or unable to step on the housing ladder. The UK’s population is forecast to grow from 61 million today to 71.6 million by 2033, but housing completions aren’t keeping pace with household formation and there is growing dislocation between people’s desire to purchase and their ability to do so.

“In addition, the UK is experiencing major socioeconomic and demographic changes. There are growing numbers of single person households, economic migrants and students, and these groups all have a greater propensity to rent rather than buy. People are also getting married and starting families at a later age, so the average first-time buyer age is creeping up, while affordability is a growing problem for most people that want to get on the housing ladder.

“The Government must recognise the importance of the PRS to the UK’s housing needs and foster an environment that encourages the continued investment in the sector by individual landlords. It needs to ensure that the sector isn’t dominated by red tape and that there is available finance to enable landlords to expand the number of properties in the PRS. If the sector is unable to grow to meet demand, we are likely to experience rental inflation and people, including the most vulnerable households, being priced out of the sector.”

Reluctant Tenants Rise As Demand Outstrips Supply

Wednesday, January 27th, 2010

The UK housing market is experiencing a trend of ‘reluctant tenants’, following a shift in supply and demand for properties, according to the Association of Residential Letting Agents (ARLA).

ARLA’s research, conducted across UK letting agents and landlords, reveals that the surplus of rental property is reducing, while demand for properties rises.

According to ARLA, this shift has generated a wave of reluctant tenants. During Q4 2009 an average 41% of members surveyed reported more tenants than properties – compared with just 24% last quarter. In addition, ARLA research among landlords revealed that 54% of those asked felt that consumers were being forced to rent rather than buy.

Ian Potter, operations manager at ARLA, explains:

“New tenants include those homeowners who were forced to sell their home during the last year either due to financial instability or a job-move. And many people now in a position to buy are struggling to find the right property, as there is also a shortage of both properties for sale and realistic mortgages.

“This rise in tenants is a positive sign for the industry, as it indicates increased market movement. It also shows that many more people will learn the benefits of living in rental accommodation.

“However, as demand exceeds supply we are faced with a new challenge, how to provide enough good-quality rental properties to meet this demand. These figures confirm our long-held view that a strong Private Rented Sector (PRS) will be fundamental in meeting the accommodation needs of future generations. But without significant government support, the sector will likely struggle.”

In August 2007 53% of ARLA members surveyed felt that there were more tenants than properties – but this figure then dropped, reaching a low of 10 per cent in February 2009. The number of available properties began increasing again last quarter.

ARLA research for the fourth quarter also shows that the period for which properties are unoccupied has fallen once again, with the average void period for the UK down from four weeks to 3.9 weeks, as tenants snap up available properties quickly.