In June the average rent in England and Wales rose by 0.9% to £718 per month, just shy of the record high of £720 pcm in October 2011. The pace of annual rental inflation has also increased, climbing to 2.4% from 2.3% in May.
On a monthly basis, rents rose in all regions of England and Wales but one. Wales saw the largest rise, with rents increasing by 2%, followed by the North West and West Midlands where rents rose by 1.7%. But rents dipped in the South West, falling by 0.3%. Following a rise of 0.9% to £1,047, London’s rents hit a new high for the second month in succession.
London remains the region with the fastest annual rental growth. Rents in the capital climbed 4%, with tenants paying an average of £41 extra per month compared to June 2011.
The South East had the second highest rental inflation, with rents climbing 3.6% compared to a year ago. On an annual basis, rents remained in negative territory in just the East Midlands after the North East and Wales returned to growth.
David Brown, commercial director of LSL Property Services, said: “The sheer weight of tenant demand continues to push up rents across the country. Lending criteria remains tight and the number of mortgages given to first-time buyers – especially those without substantial deposits – is still a long way from the level seen before the credit crunch.
“With higher rents and the growing cost of living eroding how much tenants can save towards the large deposits required to buy, it’s no surprise to see the private rented sector swelling by 262,000 households a year.”[1]
“But shorter-term factors were also at play in June. The rental market tends to see a flurry of activity at this time of year as tenants look to move before the onset of summer holidays, but this trend has been exacerbated – especially in London – by tenants moving with urgency to secure properties ahead of the disruption of the Olympics.”
Landlords saw the average total annual return on a rental property rise to 5.4% in June, up from 5.2% in May. This represents an average return of £8,884, with rental income of £7,719 and a capital gain of £1,166.
If property prices maintain the same trend as the last three months, an average investor in England and Wales could expect to make a total annual return of 7% per property over the next 12 months – equivalent to £11,538 per property.[2] Despite the improvement in rental property prices, the average yield on a rental property remained steady at 5.2%.
Brown added: “Property prices have stabilised over the past quarter and that’s played into the hands of investors, boosting returns. But the picture is far from even across the country. Stronger capital gains mean London landlords are seeing an average return £27,005 – more than three times the average for England and Wales in cash terms.
