Good news for tenants, landlords and economy
OVER the last five years, rents have grown by an average three per cent per year – but just 0.6pc annually after inflation.
Rents are now 16.3pc higher than five years ago, having most recently risen by 2.8pc over the last 12 months, according to the latest Buy-to-Let Index from Reeds Rains*.
In absolute terms, the average residential rent across England and Wales has grown by £107 since January 2010, to reach £763 as of January 2015.
Looking at the north west, average rents in January 2015 were £583.
Steven Cooke, regional operations manager for Reeds Rains, said: “The nature and affordability of UK housing is changing before our eyes. In the last five years the private rented sector has successfully absorbed a unique influx of tenants, while rental prices have broadly tracked inflation.
“But as this growth accelerates, even more investment will be necessary for the industry to keep up. So we need more buy-to-let landlords to help solve the crisis in demand for homes to rent.
“The only clear way to make rented housing dramatically more affordable is to build far more homes, far more quickly than is currently the case. And until this happens, landlords are likely to continue to earn double digit returns on their investments.”
“In the wider property market, house price growth has slowed slightly, and we’re seeing a complementary cooling in landlords’ total annual returns,” continued Steven. “But important rental yields have remained stable, moving very gently above the five per cent mark. Moreover, most landlords are long-term property investors who will choose their time to sell to maximise their capital gain.
“More investment is still needed in the private rented sector. Not only do rental properties provide an essential service, giving people who can’t yet afford to buy the mobility to search different areas, but also an increase in landlords can only prove beneficial for tenants, allowing prospective renters more choice. We are finding an increasing number of people approach us for advice about becoming landlords – and what they can do to increase the chances of securing a tenant.
“Good furnishings attract tenants along with cleanliness and the quality of the interior. For example, properties need to feel loved with clean walls and carpets. For landlords to make the best impression we would advise their properties need to be freshly painted and clean.
“And remember that your individual tastes might not appeal to all tenants so keep colours neutral and decoration simple. A property which feels loved will attract greater care from tenants and they are more likely to look after it.
“Landlords also have to consider that some tenants are renting a property for longer periods and will have high expectations for their long-term home. Low maintenance gardens, central heating and double glazing are all important features.”
Steven added: “There are large improvements in tenants’ finances, with the lowest proportion of rent in arrears since November 2013.
“In part this is a recovery from the usual festive squeeze – but also the latest chapter in a far more significant trend. Seasonal blips aside, we’ve seen a clear reduction in tenants behind on their rent in the past half-decade. This is a sign that tenants are more in control of their finances than ever before.
“The current rate at which people are being pipelined into employment is a boost for levels of rent in arrears. In the future we will look back at these economic conditions and recognise that buy-to-let investors have ‘never had it so good’.
“It’s good news for tenants; it’s good news for landlords, and it’s good news for the economy.”
* Reeds Rains Buy-toLet Index (January 2015).
The Reeds Rains team at Wilmslow