Rent rises slow by half over course of 2013

  • Rents rise 1.5% annually, down from 3.2% rise twelve months ago
  • After a 1% monthly fall, average rent in England and Wales now stands at £745 per month
  • Landlords make average annual return of over £14,000 as house price rises accelerate
  • Tenant finances suffer over festive period, as proportion of all late rent rises to 9.7%

Annual rent rises have halved over the course of 2013, according to the latest Buy-to-Let Index from LSL Property Services plc, which owns the UK’s largest lettings agent network, including national chains Your Move and Reeds Rains.

Average rents across England and Wales have risen 1.5% in the past year, to stand at £745 per month in December.

However, this annual rise is half that of a year ago. By comparison, rents increased by 3.2% in the year to December 2012.

On a monthly basis, rents have seen a seasonal drop. The average rent across England and Wales fell by 1.0% (or approximately £8) between November and December.

Despite a winter slowdown, December witnessed annual growth in lettings activity. The number of new tenancies agreed across England and Wales increased by 7.7% compared to December 2012. However, on a monthly basis there were 12.7% fewer new lettings than in November.

David Newnes, director of LSL Property Services, owners of estate agents Reeds Rains and Your Move, comments: “Very gradually, the clouds are clearing for tenants. Households have suffered from the most painful recession in living memory, but it’s clear we’re now coming out the other side.

“By investing heavily in the supply of more homes to rent landlords have played a pivotal role. Now it remains for the rest of the economy to lift real earnings, and by so doing, lift even more households out of trouble. But prospects look good. Early indications show wage expectations are starting to look up – and general inflation is under control again. If this can take hold, more prosperous tenants will make for a more prosperous private rented sector in 2014.”

Rents by region

Seven out of ten regions saw rents fall on a monthly basis between November and December, in line with a monthly fall across England and Wales as a whole.

The sharpest monthly drop was found in the South East, with rents down 2.0% since November. This was followed by a fall of 1.9% in both London and Wales.

However, the North East and West Midlands experienced rent rises on a monthly basis – up by 1.5% and 1.4% respectively. Rents in the South West also rose slightly on a monthly basis, up by 0.7% between November and December.

On an annual basis, London saw the steepest rent rises, up 4.0% from December 2012 (or £44 in absolute terms). This was followed by a 3.2% annual increase in the South West, and a 2.5% rise in the South East.

However, some regions experienced annual falls. Rents in the East of England fell the most, down by 4.4% (or £33) over the last year. This was followed by a 2.7% annual drop in the West Midlands, and with rents in Yorkshire and the Humber 2.1% lower than in December 2012. Meanwhile, with zero annual change, rents in Wales have returned to the same level as twelve months ago.

David Newnes comments: “The difficulties and frustrations of buying a home are far from uniform across Britain – or even from one town to the next. And the complexities of each local rental market reflect that. However, slower but sustainable annual rent rises are the order of the day in most areas. Local knowledge will be valuable, but improved affordability is good news for tenants and landlords alike.”

Yields and Returns

Gross yields on a typical rental property remained steady at 5.3% in December, consistent with the past three months. However, taking into account capital accumulation and void periods between tenants, total annual returns on an average rental property rose to 8.8% in December. This compares to 8.3% in November – with the increase due to accelerating house price rises. In absolute terms this represents an average return of £14,372, with rental income of £8,189 and capital gain of £6,183.

If rental property prices continue to rise at the same pace as over the last three months, the average buy-to-let investor in England and Wales could expect to make a total annual return of 6.6% over the next 12 months, equivalent to £11,234 per property.

David Newnes comments: “Steadier rent rises, and the usual seasonal dip over the winter shouldn’t put off anyone considering a buy-to-let investment. Returns have picked up considerably over the last six months, underpinned by solid rental yields and boosted by rejuvenated chances of capital appreciation. Rents will keep rising on an annual basis for the foreseeable future, while buy-to-let mortgages are still becoming more available and at more affordable rates. Supply of housing is still seriously restricted in the UK, so much-needed investment looks set to be handsomely rewarded as demand is driven further by an economic pick-up in 2014.”

Tenant Finances

Tenant finances suffered a setback in December, with the total amount of late rent across England and Wales reaching £330 million, up £102 million since November 2013. As a proportion, such tenant arrears now represent 9.7% of all rent, up from 6.6% in November, but still lower on a yearly basis than the 10.1% seen in December 2012.

David Newnes concludes: “While general inflation is back under control, and rents are rising even more slowly than this, household budgets have still been stretched and squeezed from every direction.

“The culprit is wages, which haven’t kept pace with the rising cost of living for years, and the underlying cause is the biggest economic storm for nearly a century. Landlords have invested heavily in new homes to rent, which has helped keep rent rises below inflation. But this can’t be relied on forever. A lack of house building could be the next serious crunch on the horizon, and this fundamental restriction on places to live needs even more attention.”

 

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LSL PROPERTY SERVICES: SIX IN TEN LANDLORDS PREDICT GROWTH IN TENANT DEMAND NEXT YEAR

  •  58% of landlords predict tenant demand will grow in the next twelve months
  • Four in ten landlords reported growth in tenant demand in last six months
  • Nearly a fifth expect to expand their portfolios in 2014
  • Three quarters of landlords believe now is a good time to buy or sell rental properties

Prospects are bright for the rental sector in 2014, with growing tenant demand boosting confidence among landlords, and rising prices making properties attractive investment opportunities, according to a landlord sentiment survey conducted by LSL Property Services plc, which owns the UK’s largest lettings agent network, including national chains Your Move and Reeds Rains.

In the past six months, 41% of the 2,195 landlords polled reported a rise in tenant demand, with just one in sixteen seeing a fall.  Such growth in demand has been the driving force behind the series of rent rises seen during 2013. The majority of landlords (58%) predict demand will increase further in 2014, with just 10% expecting demand to shrink.

Nearly a fifth (18%) of landlords therefore anticipates growing their portfolio of properties over the coming twelve months, while 16% already expanded in 2013.

David Newnes, director of LSL Property Services, comments: “The rise in house prices is evidence of the underlying buoyancy in the property market and the stabilising of rent rises is an indication of the current healthy state of the rental sector. Landlords are therefore in a prime position to benefit from the strong yields on properties and aspiring buy-to-let investors can be encouraged by the climbing tenant demand, as not only does it signify the excellent long-term investment opportunity, but also demonstrates the continued appetite for rental homes.”

 

“Demand for rented accommodation is strong, exemplified by the fact that the number of lettings, new viewings and applicants are all rising. There are strong foundations for prosperity in the rental sector, fuelled by increased economic optimism and future job creation. Against the backdrop of growing economic stability, more confidence is driving people forward in search of the attractive deals on offer across the buy-to-let mortgage market, which will allow them to benefit from the attractive returns.”

 

Over three quarters of landlords (77%) believe now is a good time to buy or sell rental properties. Of those who think now is a good time to buy, 71% cited attractive property prices and half highlighted the better capital returns on offer compared to other forms of investment, while 47% pointed to strong tenant demand as a key investment driver.

 

MORTGAGE FINANCE REMAINS A STUMBLING BLOCK

Despite the stark improvements in the mortgage market recently, just one in six landlords believes the availability of cheap finance is a key reason for why now is a good time to invest – although this is up from one landlord in eleven in December 2012.  In fact 35% of landlords say that it is more difficult to raise mortgage finance compared to a year ago, highlighting that for some mortgage challenges remain a deeply embedded issue.

David Newnes concludes: “While the level of buy-to-let lending has been rejuvenated and is now climbing out of the doldrums, this is still short of historic levels. Securing mortgage finance is therefore not just a concern exclusive to first-time buyers, but remains a real and serious challenge for many landlords. Lending to first-time buyers and those without large deposits has itself seen a pick up but still has a long way to go, and the proportion of UK households is only increasing. It is the rental sector that will be continually needed to pick up the slack.

 

“Filling the chasm between supply and demand is also reliant on the rising number of buy-to-let investors accessing the affordable mortgages required, thus allowing them to further widen the pool of rental accommodation on offer.”

LSL BUY-TO-LET INDEX: RENTS RISE TWICE AS FAST AS WAGES OVER PAST YEAR

  • Rents rise 1.6% in twelve months – compared to 0.8% annual growth in weekly earnings
  • Average rent in England and Wales now stands at £753 per month, despite seasonal dip
  • Landlords see record 8.9% total return over last twelve months, or £14,592
  • Tenant finances improve in time for Christmas, as proportion of late rent drops to 6.6%

Rents have risen at twice the annual rate of weekly earnings, according to the latest Buy-to-Let Index from LSL Property Services plc, which owns the UK’s largest lettings agent network, including national chains Your Move and Reeds Rains.

Average rents across England and Wales now stand at £753 per month as of November, up 1.6% compared to November 2012.

By comparison wages have risen by just 0.8% on an annual basis.  Average regular pay before tax stands at £1941 per month, according to the latest official figures.[1]

Rents across England and Wales remain significantly higher than a year ago, despite a recent seasonal drop of 0.7% (or approximately £5) in the month since October 2013.

November also witnessed annual growth in lettings activity. The number of new tenancies agreed across England and Wales increased by 1.5% compared to November 2012. This was despite a slowdown on a monthly basis, with 6.3% fewer new lettings than in October.

David Newnes, director of LSL Property Services, owners of estate agents Reeds Rains and Your Move, comments:Economic reality now resembles the most optimistic dreams of last year.  But for so many households, the dream of homeownership is still relegated to the imagination.

“It’s not just wages.  Savings rates have been swamped by inflation for half a decade – so building up even a 5% deposit is a real struggle.  Help to Buy is having a perceptible impact, with thousands of first time buyers benefiting already.  Yet millions of new households have joined the queue at the bottom of the housing ladder – and private renting is the only tenure to have taken up much slack.”

Rents by region

Eight out of ten regions saw rents fall on a monthly basis between October and November, in line with a monthly fall across England and Wales as a whole.

The sharpest monthly drop was in the West Midlands, with rents down 2.6% since October. This was followed by a fall of 1.8% in the South East and a 1.3% monthly decrease in the East of England.

However, the South West experienced rent increases of 1.1% between October and November, while rents in Wales also rose slightly on a monthly basis, up by 0.2%.

On an annual basis, London saw the steepest rent rises – 4.4% higher than in November 2012. This was followed by a 3.4% annual increase in the South West, while rents in the South East are 3.2% higher than twelve months ago.

Meanwhile, rents in the East of England have fallen by 5.5% (or £42) over the last year. This was followed by a 2.8% annual drop in the West Midlands, while rents in both the North East and Yorkshire and the Humber are 2.0% lower than November 2012.

David Newnes, director of LSL Property Services, owners of estate agents Reeds Rains and Your Move, comments: “Economic recovery is spreading throughout the UK.  And the property market is the leading edge of that wave.  As the home purchase situation heats up, the effect on the rental market is even less uniform – with rises accelerating in some areas and slowing in others.  Across the UK, every town and city is its own market, and requires local knowledge.”

Yields and Returns

Gross yields on a typical rental property remained steady at 5.3% in November, consistent with the past three months.  However, taking into account capital accumulation and void periods between tenants, total annual returns on an average rental property rose to 8.9% in November. This is up from 8.1% in October – with the increase due to accelerating house price rises. In absolute terms this represents an average return of £14,592, with rental income of £8,243 and capital gain of £6,349.

If rental property prices continue to rise at the same pace as over the last three months, the average buy-to-let investor in England and Wales could expect to make a total annual return of 10.5% over the next 12 months, equivalent to £17,294 per property.[2]

David Newnes comments: “Over twelve months the availability and affordability of buy to let finance has achieved a quiet revolution – with a very real effect on the private rented sector.  Demand for homes to rent is still soaring, yet heavy investment by landlords in 2013 has brought rent rises in most areas below inflation.  In 2014, one thing will remain certain – demand from new tenants will continue to grow.  Supply of new homes to rent will be critical in maintaining relatively affordable annual rent rises, compared to rampant house prices.”

Tenant Finances

Tenant finances improved in November, with the total amount of late rent across England and Wales reaching a new record low of £228 million.  Since November 2012 the total amount of late rent has fallen by £20 million. As a proportion, such tenant arrears now represent 6.6% of all rent, down from 7.1% in October, and significantly lower than 7.4% of all rent in arrears in November 2012.

David Newnes concludes: “Homes of all tenures have become more expensive for most people.  That’s partly because the UK is poorer than it was five years ago, with wages only gradually struggling to recover.  But more fundamentally, housing is also becoming more expensive because there aren’t enough homes to keep up with an expanding population.

“Building more homes at a serious pace is the only way to avoid the risk of stagnation in the housing market – the property industry cannot grow by competing ever more fiercely over fixed resources.  But to make new homes affordable they will also need to be purpose built for all tenures.  Private renting has been growing for decades, and new supply will need to cater for the sector for decades to come.”


[1] Office for National Statistics data, updated 18/12/13: http://www.ons.gov.uk/ons/rel/lms/labour-market-statistics/december-2013/index.html

 

[2] Assuming house prices change at the average rate of the last three months and they achieve the average yield of 5.3%.

 

Marsh & Parsons

2014 FORECAST: LONDON TO SEE HOUSE PRICES RISE BY 5-7%

  • London prices expected to stabilize in 2014 with annual growth of  5-7%
  • Prime London will continue to be a magnet for overseas buyers
  • Business confidence to boost the corporate lettings sectorImage

House Prices

London property prices will continue to dwarf those in the rest of the UK in 2014, but the rate of growth is expected to stabilize, according to estate agent Marsh & Parsons.

They forecast that Prime London house prices will rise by 5-7% in 2014, compared to 10.3% in the last twelve months[1], with the majority of growth expected to take place in the first half of the year.

Peter Rollings, CEO of Marsh & Parsons, comments: “London’s housing market saw a substantial uplift in 2013, and we expect a similarly strong start in 2014 to drive an annual rise in prices – but these won’t be as spectacular as last year. With ongoing support from Government initiatives, the rate of growth will remain sustainable.

“Following improvements in unemployment levels, we’re likely to see modest increases in interest rates next year. But with a general election coming up in 2015, any changes are unlikely to create shockwaves through the housing market.”

Supply and Demand

A lack of supply being met with high demand will continue to drive price increases in the Prime London property market. At the end of 2013, there were 18 registered buyers per available property, compared to 13.5 at the end of 2012[2], and this will ratio will remain high in 2014.

Peter Rollings continues: “Many sellers will remain cautious of putting their property on the market as they are not confident that they will be able to find somewhere to move to, therefore supply is unlikely to improve considerably next year.  As a result, property will continue to sell for close to or at the asking price and we may see our average success rate of 98% of the sale price currently being achieved in Prime London increase even further.[3]

 

Overseas Buyers

Changes in policy announced in George Osborne’s Autumn Statement mean that foreign property owners who sell second homes in the UK will have to pay Capital Gains Tax from April 2015.  But with overseas buyers and foreign nationalities making up just 28% of all Prime London purchases in Q3 2013[4], this change in policy is unlikely to have any dramatic effect on prices in 2014.

Peter Rollings continues: “With the change only being introduced in April 2015, we may find a short-term rush for tax-free sales before the policy comes into effect, helping to boost supply and fluidity at the highest level. However, even with yet more tinkering from the Chancellor, London remains a more attractive and easier place to buy property than many other cities around the world, and providing that the politicians don’t ‘kill the golden goose’, demand for the best properties will remain fierce.”

 

The Rental Market

Based on current trends, Marsh & Parsons expects rents in Prime London to hold steady in 2014, with rises of 2-4% in 2014, as opposed to the generally static rent levels recorded in 2013.

Peter Rollings continues: “The improved economic mood has eased anxiety among city firms and as a result, the corporate lettings sector will flourish next year. Based on current trends, we expect the greatest rental increases to be found in two-bedroom properties in central areas such as Kensington & Chelsea, which are popular locations for visitors from abroad. As competition heats up, void periods will continue to fall, and 2014 tenants will face intense competition for the best properties.”


[1] Annual price in Q3 2013 in Prime London, according to Marsh & Parsons’ latest London Property Monitor

[2] Data from Marsh & Parsons’ London Property Monitor

[3] Marsh & Parsons’ sales data

[4] Marsh & Parsons London Property Monitor, Q3 2013

Late Rent Lowest Since 2008

  • Levels of late rent healthiest since 2008 – tenant arrears drop by £50 million in October
  • Comes despite new high for rents across England and Wales – at £758 per month
  • Rents rise 0.2% in month since September, up 1.9% from a year ago
  • Demand for tenancies remains strong, up 7.4% since October 2012

Tenant arrears are at their lowest since 2008, despite a new record for rents across England and Wales, according to the latest Buy-to-Let Index from LSL Property Services plc, which owns the UK’s largest lettings agent network, including national chains Your Move and Reeds Rains.

Average rents across England and Wales rose to £758 per month in October, after a monthly increase of 0.2% (or approximately £1) since September.

Annually, this leaves rents 1.9% higher than October 2012 – and at a new all-time high.

October also saw lettings activity accelerate on an annual basis. The number of new tenancies agreed across England and Wales increased by 7.4% compared to October 2012. This was despite a minor slowdown on a monthly basis, with 1.6% fewer new lettings than in September.

While as a whole rents across England and Wales rose on a monthly basis, seven out of ten regions saw rents fall between September and October.

The fastest monthly fall was in the West Midlands, with rents down 3.6% since September. This was followed by a fall of 2.4% in the East Midlands and a monthly drop in Yorkshire and the Humber of 1.7%.

However, the South East experienced rent rises of 2.4% between September and October, while rents in the South West rose 1.5%, and London saw rents rise on a monthly basis by 1.3%.

On an annual basis, London saw by far the sharpest rent rises – 4.9% higher than in October 2012. While this was followed by a 3.1% annual increase in the South East, Wales matched this figure, with Welsh rents also 3.1% higher than a year ago.

Meanwhile, rents in the East Midlands have fallen over the last year by 3.9% (or £30). This was followed by a 1.5% annual drop in the North East, while rents in the West Midlands are now 1.2% lower than in October 2012.

David Newnes, director of LSL Property Services, owners of estate agents Reeds Rains and Your Move, comments: “At a time when a seasonal slowdown would usually be expected rents are up again. The lettings market appears to be experiencing an extended Indian summer. Normally we can expect the rush of early autumn to fade into a late autumn hibernation. Even as the nights draw in, demand for homes to rent seems unabated, and still well ahead of a year ago. While buying a home is certainly getting easier, it’s the private rental market which is taking the strain for the majority of new households. With below inflation rises it is renting which is still relatively affordable in the face of struggling wage growth and rock bottom savings rates.”

Gross yields on a typical rental property remained steady at 5.3% in October, the same as in September. However, taking into account capital accumulation and void periods between tenants, total annual returns on an average rental property rose to 9.7% in October. This compares to 8.4% in September – with the increase due to accelerating house price rises. In absolute terms this represents an average return of £15,837, with rental income of £8,277 and capital gain of £7,560.

If rental property prices continue to rise at the same pace as over the last three months, the average buy-to-let investor in England and Wales could expect to make a total annual return of 14.5% over the next 12 months, equivalent to £24,921 per property.

David Newnes comments: “Rents are still rising, but the pace of change is stabilising – a sure sign of health for the lettings market. Even before the latest wave of price rises, plain rental yields are stable and set to grow. Moreover, with tenant finances improving, those yields on paper will be more easily realised. Yet on top of rental income, surging capital accumulation is delivering another source of confidence. As prices rise, not only does the importance of a relatively affordable rental market increase, but the incentives for landlords to expand their portfolios are growing too.”

Tenant finances saw a rapid improvement in October, with the total amount of late rent across England and Wales falling by £49 million since September – to £245 million. As a proportion, this represents 7.1% of all rent, down from 8.5% in September. On an annual basis tenant arrears have also improved, with the total amount of late rent down by £28 million since October 2012, and also down as a proportion on an annual basis, from 8.1% of all rent in arrears in October 2012.

October’s measure of tenant arrears – at 7.1% of all rent – represents the healthiest month for tenant finances since LSL began recording this data in November 2008. During that month five years ago, 13.1% of all rent in the UK was in arrears.

David Newnes concludes: “Until we can boost homebuilding to the tune of an extra 200,000 a year, rents will keep rising on an annual basis. Yet annual rises are still below inflation. Without a doubt households don’t have cash to burn at the moment. So the fact tenants have paid down late rent to such an extent is testament to the professionalism of landlords, the availability of advice for tenants, and the stability of the entire industry.

“The first rung of the housing ladder is still a big step up. Despite a healthier circulation of mortgages, even a 5% deposit is fast becoming a challenge for many would-be first-time buyers. For the foreseeable future a healthy private rented sector will be as critical for the UK economy as it is for those besieged every month with other household bills.”

Wriglesworth Paper Summary – 23rd September 2013

Economy: Last night the two trade ministers, Lord Digby and Lord Mervyn Davies warned the Government that Britain’s economic recovery was being weakened by continuing delays in deciding how to develop the country’s airport capacity. They pointed out that more than twenty cities in rapidly growing foreign markets were served by daily flights from other European cities but not London, and they raised concerns that Britain would lose out both in exports and attracting inward investment. There has been much impatience among business chiefs regarding where to build a new runway to reduce the pressure on airports in the South-east. The Government has appointed Sir Howard Davies – former chairman of the FSA – to examine the options, but it is thought he will not publish his full recommendation until the summer of 2015, after the general election, despite growing frustration.  The two peers have highlighted their fears about the gradual decline in Britain’s aviation capacity when compared with their European competitors, and the alarming impact this is having on the UK’s competitiveness. It is though it is preventing British business from flourishing in the current global economy, as Britain’s airport system has not been optimised which is not helping attract inward investment to and from new markets.

Property: Rents are at the highest level for over a decade as house prices rise above the means of would be buyers according new research from Sequence. Evidence shows rents are hitting an 11 year high of £779, that’s a 4% rise during August alone and an 11% year on year increase. The lack of supply have supported house price growth and in London, the problem is even more serious with rents rising up almost double the national average to £1,465 and the average length of tenancy increased from 12 to 18 months as sadly renters are locked out of the sales market altogether. Growing pressure on the rental market has caused a new burst of interest in buy-to-let investing.

Personal Finance: Tax breaks for married couples are so low they are at danger of being perceived as an ‘empty gesture’ , faith leaders and campaigners have claimed. The proposed allowance, worth £150 should be ‘in the thousands’  to cut down the ‘devastating’ trend of family breakdowns, they believe. David Cameron announced that the measure will start in 2015 to acknowledging demands from his MPs. Despite this, a letter from leading Christians, Muslims and Sikhs,, as well as Tory activists adds to the pressure for more action. They believe that marriage is the fundamental building  block of society and that the tax break must have a significant impact on reducing the estimated £46 million a year cost of family breakdown to the taxpayer.

LSL November Buy-To-Let Index

TENANTS’ RELIEF AS RENTS FINALLY FALL IN NOVEMBER

  • Rents in England & Wales fall for the first time since March
  • Average rents dip to £741 per month, but remain 3.4% higher than November 2011
  • Tenant arrears improve with £241m late or unpaid – the lowest level since June 2010

Tenants in November saw the first monthly fall in rents since March, according to the latest Buy-to-Let Index from LSL Property Services plc, which owns the UK’s largest lettings agent network, including national chains Your Move and Reeds Rains.

The average rent in England and Wales fell by 0.4% in November to £741 per month, the same level as September. However, the drop is half the 0.8% average November decrease seen since 2008. Despite the seasonal fall, rents in November were 3.4% higher than a year ago, the same rate of annual inflation as October.

Six regions saw rents drop in November compared to October. The largest fall was in the South East, where rents dropped 1.9% – the region’s first monthly decline since February, while the North West and West Midlands saw rents decrease 1.1% and 1% respectively. Rents rose the fastest in Wales and Yorkshire and the Humber, while London saw marginal monthly rental inflation of 0.2%.

On an annual basis, rents are higher than a year ago in all but one region, falling in Wales. Rental growth was the highest in London, where rents were 6.9% higher than in last November and hit a new peak of £1,104. Even after their monthly fall, rents in the South East registered the second largest annual increase, 3.4% higher than a year ago.

David Newnes, director of LSL Property Services comments: “In November, tenants gained a welcome respite as rents paused their climb upwards for the first time in eight months. Landlords look to avoid having properties empty over the Christmas period, and are often more flexible on pricing at this point in the year. But the rental market has not ground to a halt by any means. The housing market is still haunted by the demons of undersupply of new homes and tight credit conditions for buyers with the smallest deposits, which is pushing up tenant demand. This is cushioning the downwards pressure on rents normally seen in the final months of the year, and will see rent rises return as competition intensifies in spring.”

Annually rising rents and renewed growth in property values meant that the total annual return on a rental property was 6.0% in November. This represents an average return of £9,747 with rental income of £7,896 and a capital gain of £1,851.

If rental property prices maintain the same trend as the last three months, the average investor in England and Wales could expect to make a total annual return of 2.7% per property over the next 12 months – equivalent to £4,451 per property.[1] The average yield on a rental property was 5.4%, compared to 5.3% a year ago.

Newnes comments: “2012 has seen concerted growth in the private rented sector as investors looked to cater to growing tenant demand and capitalise on lucrative yields on the cards in many areas of the country. This will continue into 2013. And with four in ten landlords expecting to increase rents next year, it’s likely the gap between monthly rental income and rock-bottom mortgage payments will widen yet further, allowing landlords even more flexibility on whether to take the profit, re-invest or save a slush fund for a rainy day.[2] After the latest raid on pension savings in the Autumn Statement, the strong yields on offer in buy-to-let are likely to make it an increasingly attractive way to boost retirement income.”

The total amount of rent late or unpaid fell to the lowest level since June 2010, with total arrears of £241m, down from £265m in October. This equates to 7.4% of all rent across England and Wales.

Newnes concludes: “A drastic improvement in the jobs market in recent months has made a real difference to tenant arrears, and reduced unemployment seems to be having a greater influence on the level of arrears than historically high rents at present. However, we’re also seeing many tenants acclimatising to the increased cost of rental accommodation, and prioritising meeting their monthly rent cheque above other spending. That said, Christmas usually places an additional strain on tenant finances and we don’t expect this year to be any different.

In the longer-term, rent arrears will be closely tied to the impact further austerity cuts have on employment levels. If the rate of employment falls, and rents continue to rise, we will see arrears climb once more.”