Rents rise nationwide but landlords returns drop

Published: 28/10/2011

For the first time on record, average rents in every region of England and Wales have increased month-on-month, according to the LSL Property Services.

The average tenant now pays a new high of £718 a month, up £5 against August and up £29 from last September.

Unsurprising rents in the capital have seen the largest increase year-on-year and are now, on average, 5.8 per cent higher than they were 12 months ago. However, this latest monthly increase saw the South East and East Midlands endure the biggest increase, 1.8 per cent and 1.1 per cent respectively.

Its geographical opposites – North East and West Midlands – saw the smallest increase of 0.2 per cent and 0.3 per cent but an increase nonetheless.

Yet despite this record increase, landlords are not seeing this rise mirrored in their profits; total annual returns dropped to 1.8 per cent with a capital loss of £4,666. A fall in property prices being cited as the primary reason for the drop.

Nonetheless, this blip is seemingly not affecting buy-to-let business. The industry continues to strengthen with news there are now 104 per cent more buy-to-let mortgage products available than there were three years ago. And, according to Defaqto, there has been a significant rise in the number of intermediary-only deals.

There are now 483 BTL mortgages on the market - there were just 237 in October 2008 – and 86 per cent of them are only available via intermediaries.

David Black, an Insight Analyst for banking at Defaqto, comments:

“Our analysis indicates that intermediaries are becoming ever more important within the sector, with the number of brokered products increasing rapidly since 2008.

“The key challenge for brokers is how to convert these opportunities for the benefit of their business.

“Essentially, they need to play to their core strength, which is giving advice, and this is particularly important in the buy-to-let sector where people are likely to need more guidance when selecting a suitable mortgage.”¹

This news is music to broker’s ears after HSBC last week announced claims 81 per cent of best buy mortgage deals were offered by direct mortgage lenders and not by mortgage intermediaries.

¹Mortgage Solutions (Oct 2011)

Content correct at time of publication