As the popularity of renting properties continues to boom across the country, average rent prices across England and Wales are up by 2.3% year on year, according to Your Move England. The lettings market continues to remain popular amongst younger generations, with student lettings now exerting a considerable influence upon the market. With this demand for letting properties in the ascendance, there has been a 45% increase in the delivery of Build-to-Rent homes in the past year - with private investors now creating high-quality accommodation with the specific intention of renting.
Regional ups and downs
The strongest rental growth has been registered in the South West of England, where prices have risen by 4.3% to £686 per month. London has seen rents fall, with prices down 1.3% year on year; however, it must be noted that it is still, perhaps unsurprisingly, the most expensive place to rent in the United Kingdom with an average price of £1,277 per month. In Wandsworth, for example, rents are on average £126 per week lower than in the rest of the capital – despite higher sale prices of homes in the area. However, even within Wandsworth different zones perform in different ways and John Thorogood can report that rents of terraced houses in and around the Northcote Road area have held firm and in a few cases increased where owners have invested money to maintain or improve the property’s internal condition. On a monthly basis, the West Midlands and South West are both up by 0.4% compared to September values - showing that variations are indeed highly regionalised.
Lucrative Rents
The rental yield in Northern regions, as is usually the case, earned higher returns than in the South with the average investor in the North East earning an annual yield of 5% in the year to September. Potentially lucrative yields can be seriously hampered by difficult tenants and with tenant arrears currently standing at 10.1%, a rosy picture is being painted for those in the lettings market - as this figure has been as high as 14.6%. Despite nationally strong levels of rental yield from private lettings, the volume of homes being bought privately by individuals in order to let them has decreased since the buy-to-let tax changes, which has resulted in higher tax bills for many second-home owners.
Growth of Markets
The typical notion of student digs being mildly unappealing and disheveled properties has been turned on its head in recent years, with the student lettings market now exerting a significant influence upon the rental market. Students are now able to access top-quality accommodation in their place of study, and as such, this has become a particularly lucrative market for investors. The return to study for many students in September and October typically sees an upsurge in activity in the private rental sector, and this year has been no different. In addition to a new relationship with the student market, the family lettings market has also grown recently due to greater availability of family properties on the lettings market.
With new properties being built with the express intent to be let out, and the growth of student and family markets, it is evident that the supply and demand for lettings remains strong. This stability is seen through the steadily increasing rental prices nationally, London notwithstanding, as well as the lower levels of tenants behind with their payments. The rental of properties, in lieu of purchasing, is forecast to grow in future years and so the impressive annual yields being reported at the moment should continue to be the case in the coming years.
