David Brown, commercial director of LSL Property Services, suggested that this rise was due to rising demand on rental properties, which has spurred many landlords to invest in new houses and apartments.
Brown added: “With higher rents and the growing cost of living…it’s no surprise to see the private rented sector swelling by 262,000 households a year.”
Data from LSL Property Services’ latest Buy-to-Let Index has revealed that the average rent in England and Wales rose by 0.9% in June to a cost of £718 per month.
Rent was close to reaching a record high of £720 pcm, last hit in October 2011, and is expected to rise even further over the coming months. The pace of annual rental inflation also increased by 0.1%, reaching 2.4% in June.
Only the South West of England experienced a reduction in rents, falling by 0.3%, while the other nine regions saw rises in rents on a monthly basis. Wales saw the largest rise with rents increasing by 2%.
London also saw rises for the second consecutive month, reaching £1,047 pcm and continues to outstrip rental growth in the rest of the country.
London landlords are seeing an average annual return on a rental property of around £1,166. This is mainly due to the stabilisation of property prices, which has improved profits for many landlords. Brown stated: “London landlords are seeing an average return of £27,005 – more than three times the average for England.”
If these trends continue, an average investor could expect to make a total annual return of £11,538 per property over the next year.
However, a big problem for this market is that rising rents have put significant strain on tenants, with arrears continuing to deteriorate and now standing at 9.2% of rent late or unpaid, an increase from 8.9% in May. In total, this has amounted to almost £290m in unpaid rent.
Brown commented that this trend: “…highlights how crucial it is that landlords strike a balance between securing the best possible rent and ensuring prospective tenants will be able to meet payments in the long-term.”
However, he also suggested that this rise in rents may only be short term, as he said: “The rental market tends to see a flurry of activity at this time of year as tenants look to move before the onset of summer holidays, but this trend has been exacerbated…by tenants moving with urgency to secure properties ahead of the disruption of the Olympics.”
