Kate’s Latest Summary and Analysis of Rental Reports

There are five regular reports on the rental sector, some cover the UK and some cover just England and Wales. Here is a summary of the report headlines and latest data together with Kate Faulkner’s comments below to help landlords and tenants understand the implications of these reports for them:-

Report headlines:-

Acadametrics/LSL – “Rents 4.2% higher than a year ago”
RICS – “Rents expected to increase further over the next 12 months”
Move with Us – “Average rents fall nationally in first quarter of 2013”
Belvoir Lettings – “Average rents across the UK for Q1 2013 were £3 more than Q1 rents in 2012 for offices which have traded consistently over the last five years”

Average Rents
Average Rents

Kate Faulkner comments:
“The LSL index appears to run slightly ahead of others. Both Homelet and Belvoir show slight increases year on year while LSL seems to overestimate in comparison rental growth. All rental indices from the start of the year suggest rents are pretty stable so far in 2013.”

Capital Growth for Landlords
LSL – “The total annual return on a rental property rose to 6.3% in March. This represents an average return of £10,329 with rental income of £7,751 and a capital gain of £2,578. The average yield on a rental property was 5.3% in March, compared to 5.2% in the same month last year.

ARLA “The overall average capital asset value of rented houses has risen by 4.9% over the last three months, largely reversing the fall seen then. This increase has come as a result of increases in the average value of rented houses for those managing properties in Prime Central London (up by 6.7%) and for those in the Rest of the South East (up by 8.1%). These increases outweighed a decrease of 6.9% for the rest of the UK. Over the same period, the average value of rented flats throughout the country rose by 1.7%, reversing only a small part of the decline seen three months ago. This increase has come as a result of increases in the average value of rented flats for those managing properties in Prime Central London (up by 2.0%) and for those in the Rest of the South East (up by 5.9%). These increases outweighed a decrease of 7.2% for the rest of the UK.” 

Kate Faulkner comments:
“Basically, unless you have a property in Prime Central London or high performing areas in the South East, the chances of you receiving capital growth in the current market is slim. Prices are not keeping up with inflation and neither are rents, so although if you invest cash, on the surface you secure a good return from buy to let, when taking inflation into account, the returns on buy to let are still pretty poor if you bought since 2006. Anyone buying prior to that time should still be getting a good return.”

Demand for Rented Properties
ARLA “During the last three months, demand in the rented residential property sector has strengthened in terms of the overall proportion of respondents saying that there are more tenants than properties available for them. This overall increase was largely accounted for by a quite sharp increase in demand for the rest of the UK. Figures for Prime Central London showed a much smaller increase, whilst those for the rest of the South East showed a small decline.”

RICS – “Demand from tenants increased at a faster pace in the latest three month period, with 45% more surveyors indicating demand rose rather than fell, compared to 23% in the previous period. The rise in demand was broad based across England and Wales, although it was particularly strong in the South East, East Anglia, Wales and the North.”

Kate Faulkner comments:
“Demand for rental properties is definitely on the up, but so are the number of first time buyers. Since the credit crunch, we know that although demand is outstripping supply, this doesn’t mean rents rise as they are clearly linked to wage growth which is still low. Central London rents continue to be a little volatile with some months seeing demand high and others seeing it lower.”

Supply of Rental Properties
RICS – “New landlord instructions continued to increase, but at roughly the same moderate pace as in the last quarter with 15% more surveyors indicating instructions rose rather than fell, compared to 17% in the previous period. The regional breakdown of landlord instructions paints a far more varied picture, with surveyors reporting a modest fall in East Anglia, a roughly flat picture in London and Yorkshire and Humberside, and a relatively firm pickup in the South East, Wales and the North. With growth in tenant demand outstripping that in supply, surveyors expect rents to increase at a slightly faster pace in the near term.”

Homelet – “It appears that the private rented sector is increasingly becoming the only option for those who rely on benefits – which again strains the supply of rental homes.”

Kate Faulkner comments:
“Supply is slightly increasing but it doesn’t appear to be keeping up with demand. Existing and new landlords are investing in more properties, especially those with spare cash which isn’t earning anything in a bank. However some investors are struggling to find deals which stack up financially as rents haven’t risen in line with inflation an property prices haven’t necessarily fallen as much as could have done.”

What to do next? For more help, from Kate and her team, join Property Checklists for free.

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About Kate Faulkner OBE

One of the UK’s leading property experts, commentators and analysts. An author of a number of property books, including four property guides for the consumer organisation Which?. Media appearances include BBC1 Breakfast, ITV/ITN, The One Show, BBC2 Your Money, Radio 4 You and Yours, Radio 5 Live, Channel 4, plus numerous local BBC radio stations.
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1 Response to Kate’s Latest Summary and Analysis of Rental Reports

  1. Pingback: Previous Rental Price Reports | Kate Faulkner BSc (Econ) MBA DipM CIM

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