Home Residential PropertyBuy-To-Let Rising rents encourage buy-to-let investors

Rising rents encourage buy-to-let investors

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18th Nov 11 8:41 am

Rental rates have risen faster in London than any other UK region over the last year as the capital continues to appear attractive to buy-to-let investors, a new report has indicated.

The average monthly rent on a property in London increased to £1,030 in October, a 0.1 per cent rise on September, according to LSL Property Services’ Buy-to-Let Index. However, the rate at which rental rates are rising has slowed and the annual increase has fallen to 5.7 per cent in October from 5.8 per cent in the previous month.

London’s annual increase in rental rates remains significantly higher than other regions around England and Wales. The next largest increases were in West Midlands (4.6 per cent) and the South East (4.4 per cent), while rental rates went up by just 0.8 per cent in the East of England over the last year.

Investors will also be cheered by rising rental yields for properties in the capital, which increased to five per cent last month from 4.9 per cent in October 2010. Rental yield is the amount of income an owner receives per year expressed as a percentage of the property’s value.

The average rent in England and Wales went up by just 0.2 per cent to £720 per month in October, the lowest increase since February. Rents have now risen for nine months in a row and stand at a new record high, while the average yield remained steady at 5.3 per cent.

LSL Property Services commercial director David Brown said: “Rents may be rising steadily for many tenants at present, but growing rental income is attracting investors to the sector. Property prices are below their historic peaks, yields are strong, and it is a great time for many landlords to enter the market or grow their portfolios.

“With lending to first-timers constrained, tenant demand is set to remain intense, and it is only a stronger influx of investors in the future that will help alleviate the strain on the private rented sector, and eventually stabilise the cost of renting.”

More than one in 10 rent payments were late or unpaid at the end of October, the report found, although this is still 0.2 percentage points below the previous 12 months’ average of 10.3 per cent. Unpaid rent totalled £287m in October, up from the £243m unpaid rent recorded in September.

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