Average rents in England and Wales reach record high

Average residential rents in England and Wales rose above £800 for the first time in July following the fastest monthly increase since records began six years ago.

The figures from the latest buy-to-let index from Your Move and Reeds Rains reveal that rents increased by an average of 1.9 per cent across England and Wales to £804 per calendar month in July, up from £789 the previous month and a rise of 6.8 per cent year-on-year.

Rental price increases in July were led by London, where rents rose by an average of 12.1 per cent year-on-year, followed by the East of England, up 12 per cent to stand at £838pcm.

A breakdown of the figures reveal that all 10 regions saw rents increase on an annual basis last month, with London, Yorkshire and the Humber (£582 on average), and the East (£584) and West Midlands (£583) all seeing record rent peaks.

Two regions saw rents decline on a monthly basis, with a 0.1 per cent month-on -month fall in Wales and the East of England.

Higher rents are unsurprisingly being fuelled primarily by the widening supply-demand imbalance in the rental market, according to Adrian Gill (left), Director of Reeds Rains and Your Move.

He commented, “A clear and concerted effort towards new-build properties is the most sensible way to address this issue. It boils down to supply and demand. However, it’s not the only possible response. The Government could also ensure that we’re making the most efficient use of our small supply of homes, for instance by doing more to make it easier for people to downsize their properties when they want to.”

The data from the buy-to-let index also shows that the gross yield on a typical rental property in England and Wales increased to 5.2 per cent in July, up from 5.1 per cent the preceding month and 5 per cent in July 2014.

However, total annual returns dropped last month, with landlords in England and Wales witnessing overall returns of 8.7 per cent, on average, over the year ending July 2015, marking a significant drop from the 10 per cent recorded in June and 12.5 per cent in the year ending July 2014.

Consequently, the average landlord in England and Wales saw a gross return of £15,632, with rental income making up £8,444 and capital growth contributing £7,188 in the 12 months to July.

“House price growth is easing back and this has had an effect on total annual returns. However, rental yields are perking up to compensate,” Gill added.

Separate figures released by HomeLet earlier this month also showed that rents are rising across most part of the country, with rent price increases running ahead of inflation and house price growth. The latest Rental Index reveals that average UK rents rose by 11.8 per cent year-on-year in July to stand at an average of £977 per month, or £761 excluding Greater London.

Rental price rises, according to the HomeLet data, was led by the South West of England where rent prices on new tenancy agreements signed in the three months to July were 11.4 per cent higher than in the same period of last year, while in Scotland they rose 11.2 per cent and in the South East of England there was growth of 10.3 per cent.

Martin Totty, Chief Executive Officer of Barbon Insurance Group, parent company of HomeLet, commented, “The index demonstrates just how broad based the rise in rent prices has now become, confirming that this is a UK wide trend. Regions which have long been associated with a buoyant rentals sector, such as London, continue to experience rising prices, but rents are also rising in many other parts of the country at similar rates.”

“The South West of England, for example, is benefitting from its popularity with those attracted to the area for lifestyle reasons, as well as the strong local economy in many of the towns and cities of the region,” he added.