Latest figures have indicated that rents in the UK have started to dip, with landlords who had rushed to buy property before the Stamp Duty changes beginning to rent them out.
In turn, this has provided tenants with a larger selection of properties to choose from, according to the buy-to-let index from Your Move and Reeds Rains.
Rental falls
Rents for residential properties available to be let across England and Wales have fallen by an average of 0.2% during May, in comparison to April. Typical rents now stand at £792 per month.
Annually, rents are 1.8% greater than in May 2015, half of the 3.6% annual rate of rental growth recorded four months ago.
Adrian Gill, director of letting agents Your Move and Reeds Rains, notes that the number of properties coming onto the market has narrowed the supply-demand imbalance.
Gill said, ‘this is the equivalent of a flash food for the market. Just a month ago rents were heating up and spring was in the air-but this has been put on hold as a tide of new properties to let has disrupted the normal dynamics of supply and demand.’[1]
Slows
Further analysis of the data shows that rental increases in the capital fell to just 1% in the year to May 2016. This was substantially lower than the peak of September 2015, when London rents were up by 11.6% year-on-year.
In contrast, the East Midlands saw rents rise by 7.3% in the year, followed by the West Midlands, where a 5.5% rental increase was recorded in the year.
All 10 regions of England and Wales experienced a rental rise during May, in comparison to the same month of last year.
Despite monthly rents falling as a whole, rental yields are seemingly resilient, due to a similar dip in property prices on a month-on-month basis. Gross yields on typical rental property, pre account factors such as void periods, stand at 4.9%, the same as in April.
Rental prices fall as market floods
Rising returns
When rental income and capital growth are taken into account, before property-specific costs such as maintenance, the average landlord in England and Wales saw returns of 10.2% in the year to May.
This was slightly lower than the 10.7% recorded on month previously, which reflects the slowdown in house price growth.
However, in comparison to the year ending May 2015, this stood at 9.4%, showing that landlords have seen stronger returns over the last 12 months.
In absolute terms, this means that the typical landlord in England and Wales has seen gross returns of £8,712 in the last year.
Mr Gill concluded by saying, ‘Landlords are vital in matching an escalating demand for homes from tenants. Such a scale of demand doesn’t look set to change dramatically just because of a few tax tweaks – so professional and accidental landlords will always be an essential part of the solution. Financial rewards for investing in property, taking on risk and maintaining homes will have to reflect the importance of landlords for our economy and our society.’[1]
[1] https://www.landlordtoday.co.uk/breaking-news/2016/6/rents-fall-as-landlords-flood-rental-market