September was a good month for the private rental sector (PRS) according to figures from LSL Property Services.
LSL have revealed that rents hit a record high during September.
An all-time high
LSL’s Buy-to-let Index for September found the typical rent across England and Wales stood at £757 per month, which is the highest figure the organisation has ever recorded. This represents a monthly increase of 1.8% and is up by 2.1% on the same period last year. The previous record high was in October 2012, when average rents stood at £744.
Rent growth was mirrored by an increase in letting activity, with a 6.5% rise in the number of new tenancies starting in England and Wales compared to August. This means the total number of tenancies was 9.2% higher than the figure recorded in September 2012.
David Newnes, LSL Property Services director, said tenant demand is on the up due to low salary growth and a shortage of suitable housing making it difficult for first-time buyers to get on the property ladder.
“The long-term trend to renting therefore looks unlikely to change significantly in the near future, despite the better availability of finance compared to previous years,” he added.
Of the ten regions monitored by LSL, seven (Wales, West Midlands, East Midlands, north west, Yorkshire and the Humber, London and the south east) hit a record high for average rent in September. The north east and south west saw rents rise even if they did not hit record levels, while the east of England was the only area where rents fell, dropping by 0.8%.
The biggest monthly increase occurred in the south east, where rents were up by 3.3%. Growth of 2.7% and 2.6% occurred in the north west and West Midlands respectively. On a yearly basis, London rents are now 4.4% higher than in 2012, while Wales and the West Midlands have seen significant rises of 3.1% and 2%.
As a result of these record rents, the yields provided by properties increased to 5.4% in September, compared to 5.3% in August. However, when capital accumulation and void periods between tenants are taken into consideration, the average annual return on a rental property rose to 7.4% from 6.1% the month before.
LSL claimed that if rental property prices grow at the same pace as over the last three months, the typical buy-to-let investor will make a return of 13.6% over the next year, which is roughly £23,028 per home.
Mr Newnes stated: “Landlords have benefited from strong yield growth for some time but with such a reignited purchase market, there’s now more of a ferocious incentive to invest in the private rented sector than ever before.”