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Rents fall again – even in London
High tenant demand and limited supply, however, mean it won't be long before rents resume their upward march.
by Victoria Bischoff on Jan 20, 2012 at 00:01
The cost of renting in the UK fell for the second month in a row in December, but is up 4% over the year, according to new research.
The average monthly rent in England and Wales is now £711 a month, down 0.8% on November, according to LSL Property Services. In December 2010 rents fell 1.2%.
|Region||Rents December||One month change||Annual Change||Yields December 2011||Yields December 2010|
|East of England||£737||-0.90%||5.00%||4.80%||4.60%|
|Yorkshire and The Humber||£539||0.10%||3.90%||6.50%||6.20%|
|England & Wales||£711||-0.80%||4.00%||5.20%||5.00%|
The biggest falls seen last month were in the South East and North East, which reported a 1.9% and 1.4% decline respectively.
Rents in London, meanwhile, fell for the first time since December 2010, down 0.9% to £1,023 a month.
Over the year, however, rents rose in all but two regions – the North East and South West. At 5.6%, London recorded the fastest rise, followed by the East and South East of England both with increases of 5%.
David Brown, commercial director of LSL Property Services, said: ‘With the mortgage market facing challenges from the eurozone crisis and the sluggish wider economy, credit conditions are unlikely to ease significantly in the coming year. As a result, the number of first-time buyers able to secure finance isn’t about to rocket up, and demand for the limited supply of rental accommodation will continue to rise. It won’t be long before rents will resume their upward march.'
The average rental yield dipped slightly to 5.2% in December as rents fell, but annual returns for landlords are up, LSL Property Services said. The average total annual return per property in December was 3.7%, compared to 2.7% in November.
Tenants' finances on the other hand deteriorated in December, with 10.7% of rent – some £300 million – paid late or not paid at all compared to 9.3% in November. Last year, however, the amount of rent in arrears rose to 11.7%.
Brown said he expects to see a steady rise in arrears this year as the labour market weakens and wage growth remains lethargic.
Matt Hutchinson, director of SpareRoom.co.uk, meanwhile said: 'Landlords, reluctant or otherwise, will want to avoid pricing good tenants out the market, as they are reliant on steady rental payments to cover their mortgages. Reliable tenants are worth their weight in gold, and void periods are to be avoided like the plague, even if it means dropping the rent a little, or holding off imposing rent rises on current tenants. This could provide a buffer against rental values rising out of control'.