22nd
Aug 2013
Figures that have been researched by a leading Property Services company shows that although there is a massive increase in tenant demand for rental properties, landlords’ rental income growth has dropped below the inflation rate.
- The average rent has grown by a single solitary £1 to £738 a month from May this year.
According to a Company Director the slow rate of growth is due to the recovery of the property market which is helping both first time buyers and landlords to be able to find properties that are affordable, this has helped to boost supply but at the same time has reduced demand.
All is not gloom as over the next twelve months landlords should still be able to make an average capital gain for each property of approximately £14,735 as house prices continue to rise.
The CPI (Consumer Prices Index) shows that the average monthly rent rose in England and Wales by just 1.8% up to July 2013 whilst the inflation rate was 2.8%. This occurred even though there were 12.3% more new lettings over the year, with a rocketing 6.6% rise in July alone.
-
A Company Director says: “This summer, the house purchase market has jerked into motion. And everyone is feeling the impact of that sudden change of gear.
-
"Buying a first home might only be possible for those with a big enough deposit and sufficient earnings, but the effects are reverberating through the rental market too. The supply of rental accommodation is increasing, while demand has softened slightly because of the improvement in first-time buyer numbers.
-
“In the medium-term we expect rents to at least keep up with wider inflation. Alongside the continued struggle for the majority of would-be first-time buyers, more tenants are entering the market.” “It’s unlikely July will be typical after the initial change of pace in the purchase market, but a few months of more affordable rents are a win-win for everyone.”
Gross yields on a typical rental property remained steady in July at 5.3%, up slightly from 5.2% last July.
Several factors were taken into account such as void periods between tenants and capital accumulation, total annual returns on an average rental property fell slightly to 5.0% in July 2013, compared to 5.4% in July 2012. This still represents an average return of £8,320, with rental income of £8,000 and a capital gain of £320.
He also said that “If rental property prices rise at the same pace as over the last three months, the average investor in England and Wales could expect to make a total annual return of 8.9% over the next 12 months – equivalent to £14,735 per property."
Over the last 12 months tenants have paid down £33 million pounds in late rent and finished by saying that: "This is an encouraging sign for landlords to invest, healthier tenant finances are a critical factor in the capacity of the private rented sector to keep providing new homes.”
News Archive »