Spring comes early for buy to let landlords as rents begin to rise
Added 18.03.10
Rents rose 0.3 percent in February, according to the latest Buy to Let Index from LSL Property Services plc.
The average rent in the UK reached £658 per month, 3.2 percent higher than a year ago, roughly in line with inflation. Yields on buy to let property rose to 4.8 percent.
The LSL figures are backed up by the recent RICS residential lettings survey November 09 - January 2010 which found that rent expectations are on the rise as new instructions fall.
LSL reports that the total return from investing in buy to let over the last 12 months reached 10.6 percent, the highest level since LSL Property Services plc began compiling its figures two years ago. This is despite a slight drop in house prices in February.
David Brown, commercial director of LSL, said: “The short term glut of supply in the rental market at the end of 2009 and the beginning of this year as landlords rushed to grab the stamp tax break has now disappeared. This means rents are on the rise again.
The good news for landlords is that those who missed out on the stamp duty holiday to grow their portfolios are now able to pick a new property slightly more cheaply anyway as the housing market pauses for breath, and are able to charge better rents as the competition for tenants subsides.”
Landlords in southern England have made markedly superior returns than their northern counterparts over the last 12 months.
According to LSL, the south is producing stellar returns, the midlands are broadly in line with the national average, while northern regions are lagging far behind.
A landlord investing a year ago in London would have made an average 16 percent return, equivalent to over £33,000 on a typical property, while one in the north east would barely have broken even, scraping in just £1,700.
The RICS lettings survey found that the supply of new properties coming on to the rental market has fallen for the second consecutive quarter and this has possibly brought to an end to the downward trend in rents that has been in place since the autumn of 2008.
The net balance of chartered surveyors reporting rising rather than falling rents in the three months to January 2010 was zero. This follows five quarters of negative readings, and is in marked contrast to April last year when 58 percent more chartered surveyors were reporting falling rents, an all-time low for the survey.
In addition, expectations as to the outlook for rents continues to strengthen with a net balance of 33 percent of respondents believing rents will to rise over the coming quarter (up from 22 percent).
RICS spokesperson Jeremy Leaf said: “It is becoming clear that movements in the housing market are affecting lettings. The RICS housing survey has seen a steady increase in the number of new instructions coming on to the market over the past few months, whilst simultaneously we see with this survey that the number of properties available to rent has decreased.
“This is a clear sign that the accidental landlords are returning to the sales market. If demand remains strong, which it is likely to as many first time buyers are still finding themselves priced out of the housing market, then rents should continue to rise as would be tenants compete for fewer properties.”
News feed courtesy of Residential Landlord