publication date: Sep 3, 2012
author/source: Kate Faulkner, Property Expert and Author of Which? Property Books
Summary and Analysis of Rental Reports for June 2012
There are five regular reports on the rental property sector, some cover the UK and some that cover just England and Wales. Here is a summary of the report headlines and latest data:-
|Paragon Mortgages||xx||"Average rental yield increases in Q2 2012" - (England, Wales & Scotland)|
|Homelet ||"Older tenants feeling the strain as average incomes fall" - (England, Wales, Scotland & NI)|
|Acadametrics BTL||"Tenants see rent rise for third month in a row" - (England & Wales)|
|RICS||"Rents up over four percent in the last year" - (England, Wales, Scotland & NI)|
|Belvoir Lettings||"Reports of rent rises are exaggerated" - (England, Wales & Scotland)|
Kate Faulkner comments "Latest data from all reports bar the Belvoir Index suggests rents are on the rise, however the story is really ‘rents are recovering' towards 2008 heights. Over the last five years, rents have not kept up with inflation".
Average Yields for Landlords
Kate Faulkner comments "Yields for landlords vary dramatically. A landlord who bought a property back in 2000 for the average price of £55,000 who is renting it now for the average £600 a month is likely to secure an annual yield of 11 months x £600 = £6,600 / £55,000 = 12% whereas a buy to let investor today may spend £120,000 on a similar property and yield £6,600 / £120,000 = 5.5%."
"Landlords who bought before 2003 are typically surviving the credit crunch well. Amateur landlords who came in post 2003, invested in new builds via property investment clubs are likely to be suffering financially and may have to exit the market when mortgage (and interest) rates return to normal."
Capital Growth for Landlords
|ARLA||xx||"The overall average capital asset value of rented houses has risen by 3.6% and the average value of rented flats throughout the country rose by 5.9%"|
|Savills||"We expect let residential property to deliver a total net return of just under 7% over the next 10 years"|
|LSL||"Landlords saw the average total annual return on a rental property rise to 5.4% in June, up from 5.2% in May"|
Kate Faulkner comments "As with yields, landlords who invested prior to 2003 will still have done well from a capital growth perspective. However, some landlords should consider trading out of existing properties into new investments if they want to secure good capital growth into the future. Landlords who invested in the wrong properties in the wrong places from 2003 are likely to have seen little capital growth and those that have will have had it wiped out by falls since 2007 and especially when taking inflation into account".
Demand for rented properties
|Paragon||xx||"Tenant demand stabilises in Q2"|
|ARLA||"Demand in the rented residential property sector has seen a small improvement, with more tenants than properties available, rising from 56% to 58%"|
|Homelet||"In Q2 2012 tenants aged between 66 and 70 have seen their average income decrease by 16% over the past year" and "tenants aged between 56 and 65 have also seen a drop in their annual income by 8% over the same period" and "the percentage of tenants aged between 66 and 70 who have moved into rented accommodation from a home they owned has increased by 2% to 43%, when compared to Q2 2011"|
|RICS||"Demand continues to grow, albeit at a much slower pace than in recent quarters"|
|Savills||"Over the course of 2011 the level of unmet demand for private renting continued to rise"|
Kate Faulkner comments "Demand for rented property can only rise of the coming months and years. However, it's quite clear as rents have stabilised in 2012, that tenants can only afford to pay so much. As such, rents are likely to continue to remain stable for the rest of 2012. Landlords need to be aware though, to maximise yields into the future, properties kept in good condition are likely to rent for more money, creating more diverse rents across an area than currently exist".
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