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Housing supply bottleneck pushes up rents

  • 31/08/2017
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Housing supply bottleneck pushes up rents
Falling housing stock caused average rents to rise in most areas of England and Wales in July, according to the latest Your Move buy-to-let index.

Rents increased in nine of ten regions surveyed and the average now stands at £874 – up 3.1% in the last 12 months.

The strongest performance came in Wales, where prices have grown by 4.3% in the last 12 months to hit an average of £595. The South East, East of England and North West also saw growth of more than 3% in the last year.

The only region to experience a dip was the South West, where rents fell 2.2% to £667 per month on average.

Richard Waind, Your Move director, said the government’s Stamp Duty and additional tax changes have hit landlords hard.

“The outcome has been a decline in the number of rental properties on the market and this has had the effect of pushing up prices for tenants.”

However, this seems to have been countered by a drop in tenant demand post Brexit. With tenant numbers starting to rise again, Your Move said it is possible that more rent rises could come in the near future.

In London, prices have grown 1.2% in the last 12 months to reach an average of £1,283. However, this headline figure masks big differences depending on the location of the property.

“Tenants in London face a different issue as rapidly rising travel costs are increasing the overall cost of living in the suburbs, despite rents generally being cheaper than central areas,” said Waind.

Despite rents increasing, most landlords saw their yield levels remain flat between June and July. Wales was the only area surveyed to see the average return decrease month-on-month, slipping from 4.8% to 4.7%.

On a yearly basis, however, each of the regions surveyed recorded lower yields than 12 months ago. Between July 2016 and July 2017, the average yield across England and Wales dropped from 4.9% to its current level.

“The Private Rental Sector, however, could still be seen as an attractive opportunity for investors, with the North East and North West in particular seeing strong growth,” said Waind.

“Although buy-to-let investors are preparing for the new PRA changes coming into effect in September, it’s clear that there are still people who believe that, property remains a viable investment option.”

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