UK Rental Market Remains Healthy Despite PRS Rent Falls
Rental price increases in many UK regions have slowed according to the latest data gathered by the latest Buy-To-Let Index conducted by LSL Property Services group.
The data showed that UK PRS rents increased by 1.5% in the 12 months to December 2013, less than half the 3.2% growth observed in 2012 and on the whole, UK PRS rents fell by 1% in December 2013, (around £8), reducing the average private rental sector rent to £745 (GBP) per calendar month.
The largest drop in PRS rental prices was observed in the South East, with rents down 2% since November 2013, rents also fell 1.9% in both London and Wales.Some other UK regions also witnessed significant falls in annual rental prices, including:
- East of England – PRS rents down by 4.4%
- West Midlands – PRS rents down by 2.7%
- Yorkshire & Humber PRS rents down by 2.1%
PRS landlords still made an average annual return of more than £14,000 (GBP), despite the drop in rental prices, largely due to accelerating property price rises.
Gross yields on a typical PRS rental property remained steady at 5.3% in December but the average annual profit rose to 8.8%, up from 8.3% in November, due to accelerating house price rises, representing an average return of £14,372 (GBP), with rental income of £8,189 (GBP) and capital gain of £6,183 (GBP).
Commercial director of LSL Property Services, David Brown, said: “Early indications show wage expectations are starting to look up – and general inflation is under control again. If this can take hold, more prosperous tenants will make for a more prosperous private rented sector in 2014. Steadier rent rises, and the usual seasonal dip over the winter, shouldn’t put off anyone considering a buy-to-let property investment. Supply of housing is still seriously restricted in the UK, so much-needed investment looks set to be handsomely rewarded as demand is driven further by an economic pick-up in 2014.”
If property prices continue to rise at the same pace as over the last three months, and the supply of properties to market remains the same, then the average UK buy-to-let property investor could make annual returns around 6.6%, equivalent to £11,234 (GBP) per property over the next 12 months.
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