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March 2013 Sees PRS Rents up by 0.5%

UK PRS Rents Increase Again

UK PRS Rents Increase Again

UK private rented sector (PRS) rents increased for the first time in five months in March 2013, led by busy regions such as London, according to LSL Property Services. 

The latest figures reveal that average monthly PRS rents rose by 0.5% in March compared with February to reach an average of £735 (GBP). 

London private sector rents surged to a new average high of £1,106 (GBP) per month, following a 1.3% month-on-month increase.

The study, which has been running for five years, is based on rents achieved on 18,000 UK PRS rental properties, show that average rents in the capital are now £81 (GBP) higher year-on-year.

However, the increase in rents has left a greater number of tenants struggling to keep up.

Tenants’ finances worsened to levels not seen since before Christmas 2012, with 8.5% of all rent late or unpaid in March, compared with 7.4% in February.

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ARLA reveals rental demand continues to outstrip supply

Demand for good quality rental properties continues to outstrip supply, despite the rise in average rental prices, according to the latest figures from the Association of Residential Letting Agents (ARLA).

The letting industry regulatory body’s bi-annual survey of its members revealed that more than 58% are still experiencing a significant gap between supply and demand.

This is an increase of 3% from the previous survey carried out in December 2011.

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Single-Let And Small Scale Landlords Account For Up To

 80% of All New UK Mortgage Applications.

There has been a large rise in the number of ‘Single-Let Landlords’ (landlords with just one buy-to-let property), and small scale landlords (those typically with less than four properties), over recent months up to November 2012.

Rise In Single Let Landlords Accounts For 80% Of All New Mortgage Applications

Rise In Single Let Landlords Accounts For 80% Of All New Mortgage Applications

This is the result of many new investors being drawn in to the buy to let markets by high rents and increasing yields. Average private residential property rents have risen month on month over the last nine months and it is now estimated that Single Let and small scale Landlordsnow account for approximately 80 % of all new buy to let mortgage applications.

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Tenants Prepared To Pay More Rent For London Property

Rental prices in the UK have been rising steadily for some time and rents in London have risen by 12% over the last year and look set to continue rising for years to come.

Rents Reach Record High and Continue to Rise

UK Rents Reach Record High and Continue to Rise

Central London residential rents rose 3% during the third quarter of 2012 and rental prices are predicted to rise even more over the next ten years as the supply of housing in the capital fails to meet the needs of people working in the city.

The Government forecasts a rise in residential household numbers in London of between 34,000 and 38,000 annually up to 2028, however this estimate is over ambitious according to some forecasts.

The author of a new report claims that based on development levels over the last ten years, an optimistic estimate of the number of homes which will actually be delivered each year is just 21,000.

The Government estimates were exposed in a new independent research paper, commissioned by Cluttons, called ‘Renting in London: The Coming Boom’, written by Professor Michael Ball.

Professor Ball says that the supply deficit offers attractive opportunities for residential property investors to provide long-term rented accommodation for those living and working in London. Although market cycles may affect yearly returns, income yields are expected to rise along with significant capital growth. He also forecasts average rent increases of 5% annually over the next ten years, exceeding house price growth of around 4% per year.

The research paper’s conclusion predicts a significant housing shortage, with people either paying more, crowding into existing homes or being priced out of the city.

Currently almost two-thirds of households rent in inner London and 40% in outer areas, roughly equally divided between private and social housing.

The lettings market in London continues to strengthen, as demand is still far outstripping supply. Transaction levels in terms of rental deals done rose by 31% compared to the second quarter and 8% more than the same period in 2011.

The average rent increase of renewing tenants in London during the 3rd quarter of 2012 was 4%.

Residential lettings partner at Cluttons, Lynn Hilton, said: “The private rented sector feels the strong pressures of a growing population and workforce, being both the first point of contact and the safety option for many people searching for housing. New jobs being created in London are increasingly for well-paid and highly qualified staff. Those tenants in the higher income groups, including families, will be a growing component of the rental market, seeking good-quality accommodation over longer periods. The pressure of demand from tenants wanting to live in the city will underpin rental growth at a level ahead of the historic long-term trend.”

Getting a mortgage to purchase property saves money, according to Barclays, who’s research suggests that people will save almost £200,000 (GBP) over their lifetime by buying property rather than renting.

The bank put the average cost of renting a residential property over 50 years at £623,000 (GBP), compared to just £429,000 (GBP) for buying a property, paying a mortgage and maintaining home – making a difference of £194,000.

The Barclay’s study said that around 50% of expenditure goes on mortgage payments, with around 40% going on capital repayment and interest costs, over 50 years of home ownership.

Barclay’s head of mortgages Andy Gray said that whilst the initial cost of getting on to the property ladder “can be a big barrier” for people, due to high value of deposits now required, there are still clear long-term benefits.

As inflation rises, so does the value of owning a property. While rental prices rise and fall with inflation, once a residential mortgage is paid off, all a homeowner has to pay for is the maintenance of the property and annual insurance to protect it.

While it may be cheaper to rent in the short-term, over the long-term PRS rents will inflate and tenants will be no nearer to owning property, whereas after 25 years, a home buyer will own their home outright and have financial security in their retirement.

If only getting a mortgage was that easy…..

New data released by LSL property services has shown that in February, working tenants in the UK Private Rented Sector were paying 0.6% less in rental asking prices than they were in January.

Rents for working tenants have been falling slightly since November 2011, after rising steadily for the preceding nine months of the year.

According to LSL, the average private sector rent for working tenants in England and Wales is now around £707 per calendar month.

Tenants in employment are paying on average £24 a month more now compared to the same period last year, that’s an increase of 3.5%.However, residential property rents in London continue to outpace the rest of the UK, with rental values up 5.6% on March 2011 prices.

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