Rents hit record high for third month in a row - Mortgages - News - Moneyfacts

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Rents hit record high for third month in a row

Rents hit record high for third month in a row

Category: Mortgages

Updated: 17/12/2012
First Published: 17/12/2010

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Rents increased for the tenth month in a row in November, but growth is slowing in the run-up to Christmas, according to the latest research from LSL Property Services.

The lettings agent network said the average UK rent rose to £692 per month last month, just ahead of October's record high of £691.

It means rents have now registered a record high for the third consecutive month, although the growth of 0.1% seen in November represents the smallest increase since they began to rise in February.

The increase was largely driven by rents rising by 1.8% in London to £992 per month, which takes the annual increase in the capital to 9.2%.

The average yield enjoyed by landlords rose slightly to 5% in November, thanks to increasing rents, contrasting with a slight decline in the value of an average rental property.

"In the run-up to Christmas, we tend to see the rental market slowdown somewhat," said David Brown, commercial director of LSL Property Services.

"Tenants prioritise Christmas spending over setting aside money for moving home.

"But with the limitations placed on the supply of rental property by the lack of mortgage finance, rents have continued to increase, even though the rental market's peak season is behind us."

A slowdown in the annual growth of rental property prices means that the total annual return on a property has fallen from its peak of 13.4% in May to 7.3% in November.

As a result, landlords can expect to make an annual return of £11,857, coming in the form of £7,359 in rent, and £4,498 in capital gains.

LSL said that an investor entering the buy-to-let market now could expect to make a total annual return of £3,433 per rental property.

Mr Brown said that although returns are slowing as annual house price growth steadies, investors are faced with a fantastic opportunity.

"With property prices beginning to dip, and yields improving, it is a great time for landlords to expand their portfolios and lock-in high rents.

"Even off-peak, tenant demand has remained robust enough to lift rents and the chronic lack of affordable housing and mortgage finance for first-timers will continue to augment demand from tenants, keeping rents high in the long-term."

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