UK Rental Market Remains Healthy Despite PRS Rent Falls

UK Rental Market Remains Healthy Despite PRS Rent Falls

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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