Rents near all-time high

Landlords are celebrating improved total returns over the last 12 months as rent rose and house prices maintained their recovery in April, according to the latest Buy-to-Let Index

Related topics:  Specialist Lending
Millie Dyson
14th May 2010
Specialist Lending cash coins increase grow money growth

The average rent in the UK rose by 0.6% to £663 per month in April, 2.2% higher than a year ago. Rents have risen for the third successive month and are now just £25 per month lower than their peak in August 2008.

Yields on buy-to-let property rose to their highest level all year at 4.8%, as rent increases narrowly surpassed slowing house price inflation. The monthly increase in house prices for the average rental property slowed to 0.4% in April – a drop from the 2.1% increase seen in January.  

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

“Despite the distraction of the election, the buy-to-let market has gone from strength to strength, and landlords have seen their highest rents and yields this year.

“The UK’s political uncertainty surrounding the hung parliament - and its potential impact on the economy – will continue to depress demand for house purchase. With transactional levels subdued, the private rental sector will play an even more pivotal role in providing accommodation for hesitant buyers, and we expect tenant demand and rents to be boosted in the medium-term.”
 
The total return from investing in buy-to-let over the last twelve months reached 12.8%. The average landlord would have made £19,765 in the past year, £7,115 in rent, and £12,650 in capital appreciation. This is the fourteenth consecutive month that annual returns have improved.

The market in the south remained far more lucrative for landlords. In the past year a typical landlord in London would have made a total return of 18.8% (£39,090) and a return of 16% in the South East (£25,833). In contrast, a landlord in the North East would have seen a return of 5.1%, (£6,875).

David Brown comments:

“In the past year, landlords saw bumper returns as house prices rocketed up from their low base. As house price growth has levelled off over the past three months, capital appreciation is no longer providing the lion’s share of a landlords’ total annual return. But investors are still seeing healthy profits, underpinned by strong rental income and improving tenant arrears.

“Capital growth is important over the long-haul, but it is rental income that allows property investors to run their businesses and pay their mortgages. Investment in buy-to-let must based upon the strong underlying fundamentals of rental income, yield and tenant demand. At present, these look very attractive.”

Improved annual returns have been supported by a second consecutive month of strong performance from tenant arrears. £220.3m of all rent in the UK was unpaid in April, a drop of £7m from March. This represents just 9.7% of all rent, the lowest figure since LSL Property Services plc began compiling the figures two years ago.

David Brown concludes:

“Not only has the buy-to-let market emerged from lingering effects of the recession, but landlords are now within touching distance of the record rents they achieved before the downturn. Supply and demand imbalances have corrected, and landlords are now getting a few pounds less each per month than they did at the peak of 2008.”
More like this
Latest from Property Reporter
Latest from Protection Reporter
CLOSE
Subscribe
to our newsletter

Join a community of over 30,000 intermediaries and keep up-to-date with industry news and upcoming events via our newsletter.