LSL Property Services : Sep 16 Buy-to-Let Index

BUY-TO-LET INDEX September 2016

Student check-ins drive up rents in England and Wales

Fast Facts

• Driven by student check-ins, August rents in England and Wales top previous rents with average now standing at £887

• London rents reach all-time high of £1,391

• Rents in the SE continue to rise at a faster pace than London and now stand at £975

• UK's decision to leave the EU has minimal impact on rents

  Quick Quotes

  Adrian Gill, Director of lettings agents Your Move comments:

• "The rental market appears to have left any uncertainty about the market behind with prices across England and Wales again reaching record highs."

• "London continues to be home to the highest rents but other areas such as the North East and South East are witnessing even stronger levels of growth over the year - demonstrating the seasonal impact of the student market."

• "Yields have picked up following a gentle decline in recent months, something which landlords will no doubt watch with interest over the next couple of months."

  Key insights about the data

• The pre-referendum slowdown in the market has all but ended with rents in England and Wales reaching record highs. Rental properties now command an average of £887 per month, the highest figure ever recorded by Your Move. There is a certain seasonal influence underlying this growth, caused by an

  increase in the student sector during the summer months. This is particularly noticeable in London, the South East and the North East.

• Rents in August 2016 rose by 8.7% compared to August 2015, the Your Move England & Wales Buy to Let Index found. This is in stark contrast to June, the month of the referendum, when the average rent shrank by 2.4%

• London and the South East are driving the 8.7% growth, although it is still, on average 30% cheaper to rent in the SE than in London.

  Regions outstrip London growth

• While London has long been the centre of the UK's rental scene, other areas of the country are now matching and even out performing the capital city, Your Move found.

  Key findings at a glance

  Monthly rents in August: By region

  £583 £632 £580 £640 £590 £854 £605

  £706£975

  £1,391

• Rents in the London grew 6.9% in the last 12 months to reach an all-time high level of £1,391. However, this performance was bettered by the South East where rents reached £975 per month in August. Data suggested this increase in the South East was buoyed by students moving into new rental properties ahead of the new university year. Rent increases are not expected to maintain this level of growth to the end of the year!

• Other regions to outperform the capital included the North East. This region saw rents up 12.3% in the same time period and properties in this area now let for an average of £583 per month.

• The North East has provided many popular locations for investors, encouraged by low house prices and strong returns on their investment. Yorkshire and the Humber (£580 per month) is the cheapest place to rent in England and is just 42% of the cost of renting in London.

• On a monthly basis all but two areas saw rents increase between July and August.

• This suggests that the UK's decision to leave the European Union continues to have little short-term impact on the rental market. Across all regions of England and Wales rents increased by an average of 4.8% month-on-month.

Key insights about the data

• The average gross rental yield for properties in England and Wales increased in August, reflecting increased rental income for landlords across the two nations.

• The typical return during August was 4.7%. This is above both the 4.4% recorded in June and 4.5% seen in July. However, it remains below the 5.1% witnessed in August 2015.

• On a regional basis, the North East continues to be home to the highest yields in this survey. Properties in this area typically returned 5.6% to landlords in August. This level is up on the 5.5% rate from July and also higher than the same point last year (5.0%).

• While house prices in the North East are typically lower than the national average, relatively high rent levels mean landlords see a better return here than anywhere else.

• Other areas with above average yields include the North West (5.1%) and Wales (5%), Your Move found.

• At the other end of the scale London landlords saw the smallest percentage return on their investment. Properties in the capital returned a yield of 3.5% in August, higher than the 3.2% recorded in July but still lower than the rest of England and Wales.

  Arrears levels increase in August

• Tenant finances deteriorated slightly month-on-month as the proportion of renters in arrears grew. Some 9.8% of all tenancies had arrears of a day or more in August, above the 9% recorded a month earlier.

• The long term trends continue to be encouraging. The proportion of tenants in arrears remain well below the all-time high of 14.6%, recorded in February 2010.

• On an absolute basis, the number of households in serious arrears - defined as two months or more - was 34,473 in August 2016. This is below the 36,314 cases recorded in the previous month.

• The methodology used to calculate figures in this report

has been recently revised. This survey is now created and reviewed in partnership with Cebr and is based on analysis of approximately 20,000 properties across England and Wales.

BUY-TO-LET INDEX September 2016

Key findings at a glance

Total annual rent and yield from residential property

£900

6.5%

£850

Rents (LHS)

6.0%

£800

£750

£700

£650

£600

Yield (RHS)

5.5%

5.0%

4.5%

4%

2010

2011

2012

2013

2014

2015 2016

Proportion of all rent in arrears

16%

14%

12%

10%

8%

6%

4%

2%

0%

2010

2011

2012

2013

2014

2015 2016

Regional Breakdown

Links, Downloads & Images

For more information, images, downloads including the full report, visit: https://www.your-move.co.uk/media-centre

@yourmove_uk