Rent increases calming

Rent increases calming

The latest buy-to-let index from LSL Property Services has shown that average rents have increased just 0.4% over the last month.

This is the lowest rate of increase since May however is still double the rate of increase seen in the same period last year.

Average rent now stands at £744 a month marking a 3.4% increase on this time last year.

Regional variation continues to have a big impact, although the rate of increase in London rents has shown some signs of slowing with a monthly increase of 0.9% seen. They are up 7% from this time last year.

David Brown, commercial director of LSL Property Services comments:“Rents may be rising but the good news for tenants is that the rate of increase is at its lowest in five months.

“A combination of improved buyer activity and a seasonal slowdown has taken some of the heat out of the rental market as it enters the traditionally quieter final months of the year.

“However, despite the deceleration, the fact that monthly rents rose by twice the rate seen a year ago points to the underlying strength of tenant demand.”

As a result of improving property prices in October, landlords saw an average total annual return of 6.6% on a rental property, up from 5.9% in September.

If rental property prices maintain the same trend as the last three months, the average investor in England and Wales could expect to make a total annual return of 4.3% per property over the next year.

Mr Brown said: “Landlords’ prospects now look even better on paper, with capital gains contributing to overall returns.

“But there are grounds for caution. With the long-term headwinds facing the housing market, there’s no guarantee prices will rocket upwards in the next few years, and steady rental income is crucial for an investor’s return — let alone to pay the mortgage.

“In this context, it’s even more important that landlords avoid void periods, and prospective investors who research the areas with the biggest rental demand before purchasing will do well.”

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