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PRS Tenants Could Be Hit With Rent Increases Despite Falling Inflation

PRS Tenants Could Be Hit With Rent Increases Despite Falling Inflation

PRS Tenants Could Be Hit With Rent Increases
Despite Falling Inflation

The increase in demand for rental properties in the UK’s private rental sector (PRS) from would-be tenants could drive local rental prices through the roof in some parts of the country according to a new report published by the Association of Residential Letting Agents (ARLA).

According to data published in the latest ARLA monthly Private Rented Sector report 31% of letting agent members recorded an increase in the cost of monthly rent for rental properties in UK regions between January and February this year.

41% of letting agents in the South East of England reported landlords increasing rental prices for their properties. However, in Wales only 13% of letting agents reported landlords increasing rental asking prices.

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UK PRS Landlords Expect Tenant Demand To Increase

UK PRS Landlords Expect Tenant Demand To Increase

42% Of UK PRS Landlords Plan 2014 Rent Increases

According to the latest survey by specialist house share website, Spareroom.co.uk, 42% of UK private rented sector landlords expect to increase rental prices over the next 12 months and of those some 26% are planning to increase rents by more than 3%, which is significantly higher than inflation.

In their latest Rental Index, Spareroom revealed the average cost of a double bedroom in a shared house increased by 4.5% in the final quarter of 2013, reaching a new average of £507 (GBP) per calendar month.

Room rents in London also saw a rise in prices, with an increase of 2% over the same time frame, meaning the average cost of a double room in a shared house in the nation’s capital is now at an average cost of £676 (GBP) per calendar month.

Whilst some landlords plan to increase rental prices, 58% of Spareroom’s Rental Index respondents stated that they will not be raising rents and 5% of UK PRS landlords claimed that they intend to reduce rents during 2014. 

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Smaller Buy-To-Let Properties Provide The Best Rental Yields

Smaller Buy-To-Let Properties Provide The Best Rental Yields

Smaller Buy-To-Let Properties Provide

 The Best Rental Yields

A one-bedroomed rental property in Wales may not sound like the most glamourous of property investments but it could deliver the best rental returns for landlords according to a new in-depth buy-to-let report by the UK’s largest lettings agency Countrywide.

A survey of more than 50,000 Private rented sector property owners has revealed Buy-to-let landlords are getting excellent rental yields in Wales, the North of England and the Midlands from 1 and 2 bedroom rental properties.

Landlords in many parts of Wales are achieving an average 6.7% rental yield (rent measured as a percentage of the property price), beating the North of England and the Midlands, which both average a 6.5% rental yield.

These figures are substantially higher than the average 4.6% rental yield observed in parts of Central London, regarded as the red hot heart of the UK’s property market.

One and two-bedroom rental properties have seen the greatest increase in average monthly rental prices in April 2013, with a 1.4% and 1.3% month-on-month increase to £679 (GBP) and £766 (GBP), respectively.

The detailed report into buy-to-let rental returns was conducted by Countrywide, who found that average monthly rental prices in England, Scotland and Wales have continued to increase for six consecutive months to reach an average of £842 (GBP) in April 2013.

But rent increases remain below the increased cost of living, with an annual average increase of just 0.8% measured against Consumer Price Index inflation of 2.8%.

However, average monthly rents have fallen within Central London, the South East, Wales and parts of Greater London.

The biggest rental price drop of 6.3% was seen in Central London, where average monthly PRS rental prices average £2,371 (GBP), more than double the £1,106 (GBP) recorded in parts of Greater London.

Rental returns by location

 

Rental returns by location - Source: Countrywide

Rental returns by location – Source: Countrywide

 

Nick Dunning, from Countrywide, said: “With renting for longer now the norm for many people as they save for a deposit to buy their first home, we are seeing more young families looking to rent cheaper accommodation, hence the increase in demand for smaller rental properties. While prime Central London has seen the greatest fall at 6.3%, this is simply reflecting the fact that in April stock levels in prime Central London were very high compared to last year which benefited from the Olympics. As a result this April, tenants tended to view multiple properties putting in lower offers, which some landlords accepted. However, as demand picks up into the summer, and supply and demand becomes more balanced, the same property could easily rent for more in August than in April.”

Returns by property type

 

Rental returns by property type - Source: Countrywide

Rental returns by property type – Source: Countrywide

 

Source: Countrywide

Specialist Insurance can help landlords profit from property

Specialist Insurance can help landlords avoid tenant rent default

In the UK private rented sector, the average rent for a residential property now stands at a staggering £777 (GBP) per month across the whole of the country but there are some regional differences.

Private sector rents in Greater London rose by 6.7% during the last 12 months to reach a regional average of £1,224 (GBP) per calendar month (pcm).

In stark contrast, PRS tenants in the North-East living in similar sized properties are paying an average rent of just £512 (GBP) pcm.

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Home rental costs still rising, says LSL

The average cost of renting a Private Rental Sector (PRS) property is now 3.4% more than it was 12 months ago, according to a new survey.

Rents Reach Record High and Continue to Rise

UK Rents Reach Record High and Continue to Rise

The cost of renting a property in England and Wales reached another new record high in October 2012, with typical PRS rents averaging £744 (GBP) a month, up 0.4% on September.

October’s increase is the seventh consecutive month of overall rent rises, with the biggest increases being in London – up 0.9% and the South East of England – up 0.7%.

However, it wasn’t all good news for landlords as five areas saw average PRS property rental prices fall, with the biggest decrease being in the East Midlands – down 1.8%.

The survey by LSL Property Services suggested that the pace of PRS rent rise’s has slowed and that the heat had come out of the rental market as the quieter season for new tenants approached.

David Newnes, LSL Director, said “A combination of improved buyer activity and a seasonal slowdown has taken some of the heat out of the rental market as it enters the traditionally quieter final months of the year. However, despite the deceleration, the fact that monthly rents rose by twice the rate seen a year ago points to the underlying strength of tenant demand for PRS property.”

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Tenants without Rent Guarantee Insurance Face Higher PRS Rents

Tenants without Rent Guarantee Insurance Face Higher PRS Rents

Rental prices in the UK Private Rented Sector have now reached a new record high, with the average PRS rent during September across the UK reaching approximately £741 (GBP) per calendar month (pcm).

The startling cost of PRS rental was revealed by LSL property services and represents a rise of 1.1% on the previous record high of £734 (GBP) set in August 2012.

Taken as an annual average, PRS rents have increased by 3.2% across the whole of the UK.

Rental prices in London and the South-East regions went up the most, with PRS rents rising by 1.7% and 1.9% respectively.

Average rent in London is now 6.2% higher than in 2011, averaging £1062 (GBP) pcm.

In other parts of the UK there are still pockets where rental prices are being forced down due to tenants driving a hard bargain with landlords and letting agents. Rental prices saw a decrease in three UK regions in September:

  • East of England
  • Yorkshire & Humber
  • West Midlands.

However, the increase in PRS rental prices in the rest of the UK has also left tenants without Rent Guarantee Insurance financially struggling, with 9.1% of all rent due to landlords being late or unpaid at the end of September.

Landlords can take steps to ensure regular rental income and ease the financial burden faced by many tenants by obtaining market leading Rent Guarantee Insurance from Legal4Landlords.com

Rent Guarantee Insurance Protects UK Landlords Income

Rent Guarantee Insurance Protects UK Landlords Income

The latest news from the Royal Institute of Chartered Surveyors (RICS) made great reading for landlords with the report that PRS rents had risen over the past year. However, the report could be really bad news for tenants and their finances as rental rates are set to increase again over the next 12 months.

Tenants without Rent Guarantee Insurance could face having their finances stretched even further as PRS rental rates are predicted to rise by almost 4% over the next 12 months, according to the latest RICS residential lettings survey.

The latest RICS survey revealed that Private Rented Sector (PRS) rental prices had risen by 4.3% over the last 12 months and that the upward trend appears to be somewhat sustainable due to the lack of realistic mortgage finance and high deposits required for First Time Buyers (FTBs) and a lack of suitable residential properties available for rent by tenants on the market.

The RICS residential lettings survey predicts that, over the next year, UK PRS rents could be set for an average rise of 3.9% across the whole country.

Tenants in the North West of England saw the biggest increase over the last 12 months, with rents rising by an average of 6.9%, while PRS rents in Wales failed to increase during the same period.

Landlords are urged to protect their income and provide their tenants with a little peace of mind using Rent Guarantee Insurance. A simple and affordable insurance policy that can make a great deal of difference, for both tenant and landlord finances.

Statistics from the Council of Mortgage Lenders (CML) have also shown that in the UK, over the last 12 months, Buy-To-Let mortgage lending increased by almost 20%.

Professional landlords and property investors, who are able to obtain finance, are snapping up as many suitable residential properties that they can afford, in order to profit from some of the best rental yields earned from UK rental property for a good few years.

Property investors need to research before they buy in 2012

UK BTL property investors urged to be thorough with Due Diligence

Property investors are being urged to thorough research in order to be very selective about the areas they choose to purchase investment property in during 2012.

Poor returns from savings and the continuing strong demand for rental property will be the driving factors behind an increase in property investment in the UK buy to let (BTL) market.

However, taking a gamble on certain locations could be risky for would-be Buy To Let landlords with unemployment rising, Government welfare reforms and the fallout from the Eurozone crisis still looming.

UK property investors are urged to seek to purchase Buy-To-Let properties in popular residential areas with a good infrastructure and a strong employment market, such as upmarket commuter hotspots around all major cities.

Buyer and tenant demand will continue to outstrip the current supply of UK housing stock, supporting property price growth.
Property investors should avoid areas that are reliant on manufacturing or the public sector, during 2012 as these areas may face high levels of unemployment, and with the cap in housing benefit payments now in effect, rental yields may not be as healthy. Such areas are expected to see relatively low property transaction levels in 2012 and a fall in house values that could be more than 5%.

By conducting thorough Due Diligence property investors can purchase Buy-To-Let properties in strong locations that will deliver a reliable rental incomes and a good supply of quality tenants, in addition to a modest capital growth

A list of useful Due Diligence sites to aid property investors in their search for the best areas can be found here

Private Rental Sector property rents are expected to continue growing strongly in most areas, hopefully, in the region of +5% this year, due to continued restricted mortgage lending and poor employment prospects leaving a whole generation of potential first time buyers (FTB’s) with little prospect of buying a home.

To ensure rental income remains constant throughout the duration of a tenancy, landlords can utilise Rent Guarantee insurance to keep a regular income coming in from their buy-to-let property.

Policies offered by Legal 4 Landlords include 6 and 12 Month Rent Guarantee insurance policies designed to protect landlords whose tenants default on rent payments.
Rent Guarantee insurance can also provide additional cover to meet the cost of legal proceedings for the eviction of defaulting tenants from rented properties.

Fresh research by YouGov has discovered that 80% of people living in the UK understand the full impact of the current housing crisis,

The survey revealed 80% of individuals in the nation would like to see more homes constructed, while 67% said that the current UK planning system needs speeding up.

Executive Chairman of the House Builders Federation (HBF), Stewart Baseley, said: “The study shows the vast majority of people in the UK are clued up on the current needs of the British property market. The housing shortage is having a huge impact on ordinary people, young couples who can’t afford to purchase a home and parents are being called upon to help their children to buy a house.”

The current situation is also affecting the hundreds of thousands of construction workers who depend on residential property building for income and have lost their jobs as a result of the economic downturn.

House Builders Federation members construct around 80 per cent of all new properties built in the UK every year.

House prices in England and Wales held steady in November, with no change on a month earlier and prices down 0.7% on the year, at an average £220,043.

According to the LSL/Acadametrics index, the only region recording annual price growth is London, where the value of the typical home has risen 3.1%.

November also saw an improvement in activity, with 4.5% more homes changing hands than this time last year.

LSL commercial director, David Brown, points out that static house prices don’t mean property values are standing still.

He explains: “For buyers looking to get onto the market, 0% price growth means that in real terms property is becoming more affordable. With inflation running at 5%, the real cost of property is getting smaller and smaller, which is good news for buyers and mortgage borrowers alike.”

According to Acadametrics chairman, Dr Peter Williams, the housing market in England and Wales looks as if it will end 2011 in better shape than expected.

As for the future, Dr Williams believes the outlook for transactions might weaken slightly in 2012, in the light of reduced confidence, tighter household budgets and restricted lending.

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