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UK rents soar to yet another high

Rents rose for the ninth consecutive month in October, bringing the average UK rent to £720 a month, according to LSL Property Services.

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by Victoria Bischoff on Nov 18, 2011 at 00:01

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The cost of renting in the UK hit £720 a month in October, yet another record high, marking the ninth consecutive month that rents have risen.

However, at 0.2%, the rate at which rents are increasing is slowing – down from 0.7% in September and 1.2% in August. This is the slowest rate rents have increased in eight months, according to LSL Property Services, which published the new figures. Annual rental inflation also slowed, down from 4.3% in September to 4.1%.

Over the month rents increased fastest in the South East and East of England, rising 1.5% and 0.8% respectively, LSL Property Services said. In three regions, however, rents actually fell, dropping 1.4% in the North East and the South West, and by 0.8% in Wales.

London, which has seen rents rise faster than any other region, saw the rate of increase slow significantly to just 0.1% – bringing the average rent to £1,030.

On an annual basis the biggest increases were in the West Midlands and the South East, where rents rose 4.6% and 4.4%.

With tenants struggling to meet the cost of higher rents, the percentage of rent paid late or not at all increased to 10.1% in October from to 8.6% in September – and LSL Property Services said it expects this figure to continue rising over the next 12 months.

David Brown, commercial director of LSL Property Services, said: ‘The recent increases are likely to continue to level out in run-up to Christmas – traditionally a slower time for the market. Nevertheless, despite the slower rate of increase, the cost of renting is still rising annually at nearly twice the speed of the average salary.’

‘Although buy-to-let lending has picked up steam, which has helped expand the supply of rental properties, it is still a long way off boosting supply enough to ease competition amongst prospective tenants,’ he said.

‘With no sustained meaningful increase in lending in light of the ongoing eurozone crisis, we are unlikely to see a sustained drop in the number of frustrated buyers in the coming year, and underlying demand for limited accommodation will continue to push up rents in the long term,’ he added.

Yesterday international property consultants Jones Lang LaSalle predicted that rents will continue to rise over the next couple of years. It forecast the capital will see rents rise by another 7% in 2012 and 6% in 2013.

As Brown points out, however, growing rental income will attract investors to the buy-to-let sector. In October total annual returns for landlords rose to 2.9% as property prices stabilised, while the average yield also remained steady at 5.3%.

Find out how much rent has gone up in your area in recent years and compare this to increases in earnings and inflation with our interactive map.

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5 comments so far. Why not have your say?

THere is a limit on how much rents can rise just as much as House Prices can rise

Im one Landlord who dosent put up rents when I have a good customer IM happy to leave rents alone

I have some tenants and some over 7 years and they have not seen a rent increase

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This is just property ramping - now that prices are falling the only way left for the vested interest brigade to talk up the market is to create the illusion of ever rising rental yields....the reality is that 0.2% is just statistical noise, and within that figure vast swathes of the country are now plummeting at over 1% per month.

And because property prices are still over-inflated actual yields are ridiculously low. Comparing the average rent of £720 PCM with the Halifax average house price (let alone the higher average price reported by LSL themselves....) gives a GROSS yield of just over 5%. By the time you've factored in maintenance costs, insurance, management fees and voids you're down to 3.5% before tax, which is barely better than you can get in the bank - and that's from a high-risk, over-priced and highly illiquid asset class!

And all these figures ignore the small matter of whether the agreed rent will actually get paid......

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Hi, I posted the below comment on the last LSL thread.

http://www.citywire.co.uk/money/interactive-how-much-has-rent-gone-up-in-your-area/a538600?re=278088&ea=271410&utm_source=Watchlist_Comment&utm_medium=Watchlist_Comment&utm_campaign=Watchlist_Comment#541483

To be fair Richard from CityWire said that he was going to investigate with LSL. However, I am stubborn so I am going to post the same comments again :-)

********************************************************************************

Reading the blurb at the bottom of their press release I note it states:

METHODOLOGY:

The buy‐to‐let index is based on analysis of over 18,000 properties across the UK each month. Rental values refer to the actual values achieved for each property when let during the month. Yield figures are unadjusted, and do not take account of void periods or arrears. Annual returns are based on annual rental property price inflation and void‐adjusted yield at the point of purchase.

This raises more questions than answers.

For example, are they talking about the same 18,000 properties that are analyzed each month? If so, how were they selected? Do they include LHA tenants as well as private sector? And how many of these 18,000 have sold during the time that the survey has been running? And if one sells, how is it replaced in the survey? And how are things like renovations factored in to the survey, both from a cost and rental increase perspective?

If they are not the same 18,000, then how do they keep the mix consistent? If there are more and more 4 bed houses coming on to the rental market (as people cannot sell) then of course the ‘average’ rent will go up. This masks the fact that the rent on say, a 2 bed flat, has remained unchanged for years……….

I suspect this survey is bull. It is in LSLs interest to talk up the market. How about a bit of investigation in to the methodology they use Citywire???

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To follow up my last point, it is also worth noting that the 'LSL rental price survey' appears to be compiled by a company called 'The Wriglseworth Consultancy'.

Who are a PR company.

Their website reads: ‘Established in 1998 as a specialist agency for the financial services sector………’

Could it be possible that the ‘LSL rental price survey’ is just a tool to lure more suckers in to the BTL game?

And is the Wriglesworth Consultancy owned by the same John Wriglesworth who used to be the public figurehead for Hometrack? The same guy who used to come out with comments like ‘"Speculation that there is going to be an imminent housing market crash has as much foundation as a brick on a pavlova."

If so, it would appear that this ‘independent survey’ originates from a professional mouth piece for the financial services/property industry.

Marvelous.

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Dislexic Landlord

Nov 18, 2011 at 15:01

FAO Debt Free

I would imagine that you are not and Landlord and never have been

I think most Landlords look a lot futher ahead in there bussiness plans than you think

I for one have been in the bussiness since 1982 and I think I have the experince to comment and make a judgement on the BTL world

This is a fact my freind I have made more money ithan I could have ever made by putting money in the bank lat me give you some figs to show you how much money can be made in the BTL game

I bought a two bed flat in 1982

Purchase Price £12599

Rent at that time £32.00 per wek

THe following is the situation now

Valuation £75000 Pre Crash Value in 2007 £99000

Rental Value per week now £125.00

The property has never had a void of more than 2 weeks

so the yeild now against the Purchase price is now in the region of 45%

This is just one property and It cost me in cash terms less than £2000 in 1982

I hope this shows you how much money I have made since 1982

Can you imagin what my £2000 would be worth today in a high Intrest account at the bank

maybe you could do the maths and tell me