Rising rents tempt some landlords to invest in properties
Annual rental growth strengthened for the third consecutive month, prompting buy-to-let investors to purchase more properties, letting agent Hamptons reported.
Its latest monthly lettings index showed that average rents went up by 7.9%, or £89, to £1,222 per calendar month (pcm) across Great Britain in the 12 months to November 2022.
This rental growth was led by Scotland where rents on newly let homes are exempt from the price freeze introduced in September. Rents rose by 12.3%, or £92, to £836pcm in the country over the last year.
This rate is faster than any other area, or at any time since the Hamptons Lettings Index was launched in 2012.
In the capital, the average rent rose by 8.9% to £2,037pcm in Outer London, passing the £2,000 mark for the first time.
The annual pace of Inner London rental growth softened to 20.4%, where monthly rents are unsurprisingly still the highest in Great Britain at £2,805pcm. The falling pace of rental growth here, Hamptons said, meant rents have fully recovered to where they were before the pandemic, with any further rises pushing rents to record highs.
As a result of continuing increases in rents, Hamptons noted that landlords are set to buy a slightly higher proportion of homes this year than they did in 2021.
So far this year, 12.2% of homes were bought by an investor in Great Britain, the highest level since 2016 and up marginally from the 11.7% recorded during last year. However, purchases remain below their 15.5% peak in 2015, the year before the 3% stamp duty surcharge was introduced.
“Rising rents are tempting landlords to dip a toe back into the slowing sales market to try and pick up deals they couldn’t have got six months ago,” Aneisha Beveridge, head of research at Hamptons, said. “With sellers more open to negotiation and rents rising rapidly, returns for equity rich landlords have been rising.
“While we’re unlikely to see landlords return to buying at pre-stamp duty surcharge numbers, it’s possible they may outnumber first-time buyers in some months next year, as was common before 2016.”
Beveridge added that while house price growth is slowing, rental growth continues to strengthen, offsetting some, but not all, of landlord’s increased costs.
“It’s these rising costs which are likely to mean rental growth will remain high for the next few years,” she remarked. “In Scotland, where landlords are capped in their ability to pass on higher costs to sitting tenants, rents on newly let properties will likely continue topping the growth charts. When a tenant leaves and a home is re-advertised, the jump back up to market rate is much larger.”
