By Mike Edwards
There is no relief for tenants as rents rise in all regions for the first time on record, according to the latest buy-to-let index from LSL Property Services plc. September figures show the average monthly rent in England and Wales rose by 0.7% to £718, surpassing the previous record high of £713 in August. With annual rental inflation at 4.3%, the average rent is now £29 per month higher than September 2010.
Rents rose in all regions of England and Wales for the first time on record and as a result rents hit record highs in six regions. Not surprisingly rents increased the fastest in the South East and the East Midlands, where they rose by 1.8% and 1.1% respectively compared to August. The smallest increases were in the West Midlands (0.2%) and the North East (0.3%). However, over the course of last year, London’s rents have risen at a faster rate than any other region, increasing by 5.8%. However the appetite for UK property investment outside of the capital also remains subdued, with 12.5% of investors looking to acquire over the coming year.
LSL also report that annual returns on rental property dropped back in September after property prices fell annually. The average total annual return in September was 1.8%, the equivalent of £2,995 being £7,661 in rent, with a capital loss of £4,666. However, property prices in the last quarter have held up better than in the previous twelve months, and if this is maintained, a property investor could expect to make a total annual return of 8% over the next year.
Rising rents may prove to be a headache for tenants, but they are improving the outlook for investors – which may in turn encourage further investment in the private rented sector. Despite capital losses after house prices fell annually, growing rental incomes means returns are still in the black. The average yield rose from 5.2% to 5.3% in September, the highest level since the housing downturn, and outstripping many investments. So with house prices yet to resume their upwards climb, there are opportunities for prospective investors to secure profitable bargains.
Figures this week from Hamptons show that investors in the shape of cash buyers are being enticed back to the market. They have reported a yearly increase in cash buyer applicants (from 11.86% in September 2010 to 12.46% in September 2011) emphasizing the perceived strength of residential property as an investment asset. Marc Goldberg, head of sales at Hamptons International says: “Due to the long-term nature of property as investment class, many of our buyers prefer to invest their cash in bricks and mortar rather than more uncertain assets such as stocks and shares. Although the current economic downturn may have caused uncertainty, vendors can take heart that we’re seeing an encouraging increase in cash buyers ready to complete quickly.”
However, this picture of positivity jars with the appetite for investment seen in the latest Young Index figures, which appear to more accurately reflect the wider sentiment of continuing economic uncertainty. This quarter’s figures show a fall in the proportion of investors seeking to acquire property in London over the coming 12 months to 33.3% (from 46.3% in the previous quarter and 59.3% in Q4 2009).
Recent Comments