Rents have risen at just 1.4% and tenant arrears have improved over the last 12 months

Landlord Expert
By Landlord Expert July 18, 2014 12:18

The average residential rent across England and Wales is now 1.4% higher than in June 2013. In absolute terms, this amounts to £747 per month, up from £737 per month in June 2013.

While the latest annual rental increase is below the rate of inflation (CPI of 1.9%) for the thirteenth month in a row, this means rent rises have doubled the pace of average pay growth.

By comparison, average earnings have risen by just 0.7% on an annual basis, according to the most up to date figures, released this week.

David Brown, commercial director of LSL Property Services, said: “If rents had kept up with inflation for the last twelve months, this summer would have seen the average rent break through £750 per month. And that hasn’t happened.

“With housing costs making up such a big section of monthly budgets, it will be encouraging for many tenants that rents are going up more slowly than other household bills.

“Thanks to extensive investment by landlords the supply of homes to rent has grown rapidly, and this has restrained rent rises.

“But while the private rented sector is becoming cheaper in real terms, the cost of living challenge continues. And this is because wage growth has been constrained.”

Rents in eight out of ten regions are higher than a year ago. The fastest annual increase is in the South East, where the average monthly rent is now 2.9% higher than in June 2013.

This is followed by a 2.2% annual increase in the North West and annual rent rises of 1.7% in both the South West and Wales.

In two regions rents have dropped over the last twelve months. This was led by the North East with a 4.6% fall, followed by an annual fall of 0.7% for rents in the East of England.

On a monthly basis, six out of ten regions have seen rents rise between May and June. The fastest month-on-month increases are in the East of England and the South East, with rents respectively 1.7% and 1.2% higher than in the previous month.

Four regions have seen rents fall in the last month. In Wales average rents were 2.0% lower in June than in May, while the South West experienced a 1.6% monthly drop.

As of June the gross yield on a typical rental property in England and Wales stands at 5.1%. This represents a fall of 0.3% since June 2013 when the gross yield on a rental property averaged 5.4%.

However, yields are steady on a monthly basis, with 5.1% the same as was seen in May 2014.

Despite lower yields, landlords have seen the best total returns in four years. Taking into account price growth alongside void periods between tenants, total annual returns on the average rental property have reached 11.8% in the twelve months to June.

This is up from 5.5% in the twelve months to June 2013, now at the highest level since June 2010, when total annual returns previously peaked at 12.4%.

In absolute terms this means the average landlord in England and Wales has seen a return of £19,475 in the last twelve months, with rental income of £8,158 and capital gain of £11,317.

 

Landlord Expert
By Landlord Expert July 18, 2014 12:18

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