LSL figures revealed that the average rent in the UK increased by 0.5% to £667 per month in May and is 2.7% or £18 higher than May 2009.
However, not all regions have seen growth, with rents falling by 2.7% in the North East and 0.2% in the North West.
By comparison, London rents increased by 1% to £924, while the West Midlands saw a rise of 2.1% to £540 per month.
In addition, yields on buy-to-let properties have remained at their highest level since December 2009 at 4.8%, as rents increased faster than house prices. The price of the average buy-to-let property rose by 0.1% in May, with an annual increase of 8.6%.
Landlords’ annual return from investing in buy-to-let increased to 13.2% in May up from 12.8% in April, with the average landlord making £20,363 made up of £7100 in rent and capital gains of £13,263.
Yet, LSL said that returns are now set to balance more towards income as house price growth is now stabilising. LSL said that landlords investing today could expect to make annual returns of 5.4% in the next year, equivalent to £9096 on a typical property, with the majority of this made up of income rather than capital gains.
Tenant arrears jumped 1% in May to £244m, 10.7% of all rent in the UK. Almost 510,000 tenants owed rent in May compared to 465,500 in April. Nevertheless, arrears are still 1% lower than the same period last year.
David Brown, commercial director of LSL Property Services, said: “The fundamentals of sound property investment – tenant demand, yield and rental income – are in place for the buy-to-let recovery to continue apace. But we need to wait for the Budget.
“If the Government proceeds with its short-sighted plan to impose a higher Capital Gains Tax on the private rented sector, it will risk bringing the recovery to a juddering halt, especially if neither taper relief nor indexation allowance accompanies the hike. Without either of these, the new tax would penalise sustainable long-term investment, deterring private landlords and institutional investors alike.”
