Under embargo until 00:01 Friday 16th November
RENT RISES SLOW, BUT OCTOBER SEES RECORD OF £744 PER MONTH

Rents in England & Wales rise at slowest monthly rate since May

Average rents hit all time high of £744 per month

Tenant arrears fall to lowest level since January 2011, at £265m
Tenants saw average rents rise by 0.4% in October, the slowest rate of increase since May, according
to the latest Buy-to-Let Index from LSL Property Services plc, which owns the UK’s largest lettings
agent network, including national chains Your Move and Reeds Rains.
Average rent in October
Despite the slowdown in rental inflation, the monthly increase represents
double the size of the 0.2% increase seen in the same period last year.
£750
£700
£650
£600
After seven months of rent rises, rents are 3.4% higher than at the same
2009
2010
2011
2012
point last year, with the average rent in England and Wales at a new high
of £744 per month.
In London and the South East rents continued to rise, albeit at slower rates of 0.9% and 0.7%
respectively. Five regions saw rents fall in October, with the sharpest falls in Wales and the Midlands.
Rents in Wales fell by 1.6%, while those in the East Midlands fell 1.8% – the first fall in this region
since March.
On an annual basis, rents rose the fastest in London. They
£760
5.6%
£740
5.4%
5.2%
£720
5.0%
£700
increased by 7% to £1,102 – breaking the £1,100 barrier for the
4.8%
£680
4.6%
£660
first time. The South East saw the next highest rise, 3.2% higher
4.2%
£620
4.0%
Oct-12
Sep-12
Aug-12
Jul-12
Jun-12
May-12
Apr-12
Mar-12
Yield (RHS)
Feb-12
Jan-12
Dec-11
Nov-11
Oct-11
Rents (LHS)
Sep-11
Aug-11
Jul-11
Jun-11
May-11
Apr-11
Mar-11
Feb-11
Jan-11
Dec-10
Nov-10
Oct-10
Sep-10
Aug-10
Jul-10
Jun-10
May-10
Apr-10
Mar-10
Feb-10
Jan-10
Dec-09
Nov-09
than a year ago. Meanwhile after monthly falls, rents in both
4.4%
£640
Wales and the East Midlands are lower than at this point last year – by 2.2% and 1.5% respectively.
David Newnes, director of LSL Property Services comments: “Rents may be rising but the good news
for tenants is that the rate of increase is at its lowest in five months. 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.”
“Looking ahead, it’s difficult to see rents remaining stationary once the winter lull has passed.
Admittedly, the sales market has shown signs of life in the last month, and the Funding for Lending
Scheme seems to be acting as a catalyst for a modest improvement in the mortgage market. However,
banks still need to set aside large sums of money for high LTV lending, so in the longer term the
number of first time buyers won’t return to the level necessary to significantly undercut the strong
demand for rental property.”
As a result of improving property prices in October, landlords saw an average total annual return of
6.6% on a rental property in October, up from 5.9% in September. This represents an average return
of £10,819 with rental income of £7,926 and a capital gain of
£2,892.
14%
10%
6%
2%
If rental property prices maintain the same trend as the last
-2%
three months, the average investor in England and Wales could
-10%
the next 12 months – equivalent to £7,067 per property.1 The
1
Total Annual Return from Residential Property
(adjusted for void periods)
-14%
Oct 12
Sep 12
Aug 12
Jul 12
Jun 12
May 12
Apr 12
Mar 12
Feb 12
Jan 12
Dec 11
Nov 11
Oct 11
Sep 11
Aug 11
Jul 11
Jun 11
May 11
Apr 11
Mar 11
Feb 11
Jan 11
Dec 10
Nov 10
expect to make a total annual return of 4.3% per property over
-6%
Assuming house prices change at the average rate of the last three months and they achieve the
average yield of 5.4%.
average yield on a rental property rose to 5.4%, from 5.3% in October 2011.
Newnes comments: “Landlords’ prospects now look even better on paper, with capital gains
contributing to overall returns. But there are grounds for caution. With the long-term headwinds
facing the housing market, there’s no guarantee prices will rocket upwards in the next few years, and
steady rental income is crucial for an investor’s return – let alone to pay the mortgage. In this context,
it’s even more important that landlords avoid void periods, and prospective investors who research the
areas with the biggest rental demand before purchasing will do well.”
The total amount of rent late or unpaid fell to the lowest level since January 2011, with total arrears
of £265m, down from £297m in September. This equates to 8.1% of all rent across England and
Wales.
Newnes concludes: “An improving economy and a resilient jobs market have helped tenants get on
top of their rent. But we’ve also seen a change from landlords, who are cherry-picking the most
financially robust tenants – especially for the most expensive properties. Property investors have
become incredibly rigorous with their checks on prospective tenants, and are feeling the benefits.
“Tenants, too, have cut down on spending as a necessity. Whether tenants can keep up this prudence
over the festive season remains to be seen. 2013 will bring more austerity, and if rents rise further,
arrears are unlikely to continue to fall.”
REGIONAL BREAKDOWN
London
East of England
South West
Yorkshire and The
Humber
North West
Wales
South East
North East
West Midlands
East Midlands
England & Wales
Rents
Oct
£1,102
£760
£641
1 month
change
0.9%
1.4%
0.5%
Annual
Change
7.0%
1.8%
0.3%
Yields
Oct
2012
5.1%
4.9%
3.9%
Yields
Oct
2011
5.1%
4.9%
3.9%
£540
£593
£547
£781
£530
£563
£546
£744
-0.3%
-0.2%
-1.6%
0.7%
0.2%
-0.5%
-1.8%
0.4%
1.6%
2.6%
-2.2%
3.2%
2.7%
2.2%
-1.5%
3.4%
6.7%
7.3%
4.3%
5.1%
5.2%
6.0%
6.0%
5.4%
6.5%
7.1%
4.4%
5.1%
5.0%
5.8%
6.1%
5.3%
For further information please contact:
Adam Kirby / Dan Pike, The Wriglesworth Consultancy
020 7427 1400
Melanie Cowell, LSL Property Services
01904 698860
METHODOLOGY:
The index is based on analysis of approximately 18,000 properties across England and Wales. Rental
values refer to the actual values achieved for each property when let. Yield figures are unadjusted,
and do not take account of void periods or arrears. Annual returns are based on annual rental
property price inflation and void-adjusted yield at the point of purchase. These figures are subject to
revision as more data becomes available.
This Buy-to-Let index has been prepared by The Wriglesworth Consultancy for LSL Property
Services. It has been compiled using information extracted from LSL’s management information. The
copyright and all other intellectual property rights in the buy-to-let Index belong to LSL. Reproduction
in whole or part is not permitted unless an acknowledgement to LSL as the source is included. No
modification is permitted without LSL’s prior written consent.
Whilst care is taken in the compilation of the buy-to-let index, no representation or assurances are
made as to its accuracy or completeness. LSL reserves the right to vary the methodology and to edit
or discontinue the buy-to-let index in whole or in part at anytime.