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Rents continue relentless upwards surge

Rents continue relentless upwards surge

Category: Mortgages

Updated: 16/09/2011
First Published: 16/09/2011

MONEYFACTS ARCHIVE
This article was correct at the time of publication. It is now over 6 months old so the content may be out of date.

Rents recorded their largest monthly rise in a year in August as the demand for rental properties continued to grow.

The average rent in England and Wales rose by 1.2% to £713 per month last month, according to LSL Property Services, surpassing the previous record high of £705 seen in July.

It means rents have risen for seven months in a row, with the average rent currently £27 per month higher than a year ago.

With potential first-time-buyers struggling to secure mortgages, many are instead having to turn to rented accommodation in order to put a roof over their heads.

David Brown, commercial director of LSL Property Services, added that graduates moving for their first jobs had further exaggerated the demand for rental properties over the summer.

"With significant improvement in the number of buyers able to secure a mortgage unlikely in the foreseeable future, competition for rental accommodation will not drop and further rent rises remain on the cards," he added.

The recent revival in the buy-to-let market has left landlords in an enviable position.

The total annual returns on a rental property improved in August after annual decreases in property prices slowed.

The average total annual return in August was 2.6%, the equivalent of £4,336 - £7,626 in rent, with a capital loss of £3,290.

The report added that if property values maintain the same trend as the last three months, a property investor could expect to make a total annual return of 10.5% over the next 12 months – equivalent to £17,381 per property.

"It is rental income and yields that are tempting new property investors to the market, rather than thoughts of immediate capital gains," said Mr Brown.

"In fact, yields on rental properties are much stronger than in many other types of investment.

"With these fundamentals looking so attractive for long-term investment strategies, a sustained increase in buy-to-let lending would help meet the growing demand from would-be investors - and allow the sector to expand to match the increasing demand from would-be buyers."

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