14:35 PM, 19th August 2011, About 10 years ago
Buy to let rents are still rising and are unlikely to stop any time soon despite hitting a record high after increasing for the sixth month in a row.
The average private rented home in England and Wales costs a tenant £705 a month – according to LSL Property Services, the UK’s biggest letting agent that owns brands Your Move and Reeds Rains.
Rents are now just under £30 a month higher than 12 months ago, with yields at 5.2% compared with 4.8% a year ago.
The news gives landlords double cheer as the Bank of England has indicated that interest rates are unlikely to go up until 2013 if the UK economy continues to falter.
Instead of funding high mortgage repayments from rents and waiting for capital appreciation, landlords now have a regular monthly income as the gap between rents and low mortgage interest repayments widens.
Landlords in London are seeing the best returns. In July, rents reached a record £1,009 per month – an annual increase of 7.1%. The next biggest rises were in the North East where tenants are paying 5.5% more, and the East and West Midlands, where rents were up 4.8%.
Rent rises have slowed in the West Midlands (-0.6%), Yorkshire & the Humber (-0.2%) and the North West (-0.1%).
David Newnes, estate agency managing director of LSL Property Services, said: “Rents are on an upward trajectory, and it is unlikely that tenants will gain respite any time soon. Demand from thousands of frustrated buyers each month is underpinning buoyant competition for rental homes, enabling landlords to increase prices.
“This is the peak summer season, with more renters on the move, the market will continue to heat up. Such strong demand and high rental incomes has forced lenders to take notice, and more are returning to buy to let. Nevertheless, even with squeeze on landlord finance abating, the new supply will not be enough to meet demand from tenants.
“The increasing cost of rental accommodation – alongside the soaring cost of living – is eroding first-time buyers’ ability to save deposits. But first‐time renters are also keenly feeling the pinch. As rents climbs, so does the size of the average deposit a new renter must find.”
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