Rental prices in England and Wales increased by 1.2% in August, topping the previous record high of £705, now at £713 per month; demonstrating the largest monthly increase since August 2010. Rents are now, on average, £27 per month higher than when they peaked in the summer of last year, based on the latest figures released by the UK’s largest lettings agent LSL Property Services, which surveyed 18,000 homes as part of the study. According to Urban Exposure’s Adrian Mediratta “the main reason we are seeing such profound growth in the rental market, is due to would-be house buyers struggling to secure mortgages and opting instead to explore rental market options”.
As Adrian Mediratta goes on to explain: “while it’s bad news for renters, landlords are enjoying an estimated rental yield averaging 4.5% as a result of the demand”. According to LSL’s findings, as a result of the recent declines in house prices, the total return from investing in buy-to-let over the last year dropped slightly to 10.1% in July.
The average landlord would have made a total return of £15,961 in the past year, £8,706 in capital gains and £7,255 in rental income. As Urban Exposure’s Adrian Mediratta explains, it is unlikely that potential buyers will see a change in the conditions of mortgage lending any time soon, resulting in continued demand for rental properties:
“With high deposits still required of buyers, competition in the rental market is increasing, and is likely to demonstrate continued growth over the coming months. This throws up an abundance of opportunities for buy to let investors looking to increase their portfolios and take advantage of the market buoyancy for rentals, but purchase prices are at historic lows. Landlord returns will be driven by rental income in the short to medium term, and any future capital growth when the market picks up can be viewed as a bonus.”
Urban Exposure is a private residential landlord with a portfolio of property across the UK, and also sources buying opportunities for portfolio investors looking to invest in the UK.