Cost of renting goes up

Landlord Expert
By Landlord Expert March 21, 2011 16:02

Tenants signing new contracts suffered a small rise of 0.2% in rents during February 2011, pushing the average rent in England and Wales to £684 per month – 3.9% higher than a year ago, according to the UK's biggest lettings agent network. But there was also an increase in tenant arrears during the month, indicating that many renters are struggling with the rising cost of living.

The average yield on buy to let property increased to 5% in February as rents increased at a faster pace than rental property values, according to the LSL Property Services buy-to-let index. Rents increased fastest in Wales, where they rose 1.9%, and the north-west and the east Midlands, where they rose by a respective 1.1% and 0.8%.

But decreases were experienced in the north-east, where rents fell 1.4%, Yorkshire and the Humber and the south-west, where they fell 1.2% and 1% respectively.

LSL said fierce competition among renters in many areas of the country coupled with a lack of affordable mortgages available to home buyers bolstered demand for rental properties, cutting short the "traditional lull" it sees between December and February.

Landlords suffered setbacks in the shape of increased tenant arrears, with 12.6% of all UK rent unpaid or late by the end of February – an increase from 11% the previous month. Unpaid rent totalled £296m across the UK in February, up from £258m in January.

David Newnes, managing director of LSL property services, which owns Your Move and Reeds Rains, said the growth in tenant arrears is an early indicator of the impact of the wider economy on households. "At a time when rents are close to all-time highs and rising once more, many tenants are feeling the financial squeeze of spiralling costs of living compared to sluggish pay growth," he said.

Newnes added that while the figure is not representative of all renters and the vast majority of landlords do not encounter difficulties in receiving rental income, "the figures should serve as reminder to property investors that active and prompt intervention is necessary at the first sign of a tenant showing signs of difficulty in paying the monthly rent cheque, or they themselves will see mounting mortgage arrears."

LSL said landlords' total annual returns creeped up from 3.34% in January to 3.4% – close to the low seen in October 2009 – as the fall in property prices over the last year was counteracted by strong annual growth in rents. An investor entering the market now could expect to make an annual return of £5,933 per rental property – equivalent to £8,202 in rent and capital losses of £2,269.

David Newnes said: "Over the past year, extremely strong rental income has underpinned landlords' annual returns. With house prices unlikely to rocket up as the year progresses, rents will continue to provide the lion's share of returns for property investors."

Jonathan Moore, director of, said: "Colossal house prices, combined with the ongoing famine of affordable mortgages for first-timers has cranked up the pressure on the limited supply of rental accommodation. With over 180,000 extra frustrated first-time buyers entering the private rental sector in 2010, it's no surprise that property rents are soaring.

"A cheaper option than renting a property is to flatshare. But even the flatsharing market is feeling the effects of surging demand. The average rent for just renting a room has hit £399 a month, although this is still £285 cheaper than renting the average flat."

Landlord Expert
By Landlord Expert March 21, 2011 16:02

Membership Login

Register| Forgot Password?


Recent Member Comments

  • User AvatarDave Osbourne { Had a blocked gully which tenant ignored after recent rain had the lounge and hall partly flooded the floor is going to be replaced but... } – Oct 16, 4:47 PM
  • User AvatarFiona Bullock { Dear Sir, I have received a text and email from my tenants saying they wish to end their tenancy of 3 years with effect from... } – Jul 05, 12:55 PM
  • User Avatarchristine clare timmins { Hi Rahima - Did you manage to resolve your problem? I am new to this site and saw your dilemma - we are about to... } – Jun 28, 9:12 PM
  • User AvatarShani Zvi { Hey, I need an advise regarding the TDS registration. The agency I'm working with claims that they need to register the tenant Zero Deposit scheme... } – Jun 04, 11:43 AM
  • Amanda Harrison { Advise needed }
  • Older »

News Archive