Average rents rose and rental payment arrears fell in the first quarter 2013 compared to the previous year, according to the Countrywide Quarterly Lettings Index.
The Index, which is based on over 50,000 properties across England, Scotland and Wales, found that all parts of the UK, except Scotland and the South East, experienced a rent increase from this time last year (Q1 2012), with average monthly rents increasing the most in Wales and the East of England in Q1 2013, both up 5.5% to £618 and £814 per month respectively.
Outer London’s average monthly rents rose by 5.4% year-on-year to £1,107per month. The South East, on the other hand, experienced a decline with average rents falling -1.1% from the prior year to £1,054 per month. In Scotland average rents fell 2.6% to £580 per month, making it the cheapest rental accommodation in the UK.
In the Midlands, average rents rose 1.8% to £636per month. The highest rates of average rents were in Inner London at £2,387 per month in Q1 2013, up 1.9% from Q4 2012 and 1.9% from the prior year.
The North and South West also experienced a year-on-year rise in average rents to £603 per month and £745 per month (up 2.7% and 2.3%) respectively, but fell from Q4 2012 (-1.9% and -0.2% respectively).
Scotland was also an anomaly in rental arrears. It was the only region in the UK to witness an increase in arrears outstanding more than 30 days in Q1 2013, up 2.6% from the prior year to 6.6% of rent roll.
All other parts of the UK experienced a drop in rental arrears outstanding more than 30 days in Q1 2013, with the South West having the lowest arrears at only 4.5% of rent roll, an improvement of 1.2% year-on-year and 0.3% from the prior quarter. Inner London had the highest arrears at 7.3% of rents due in the quarter, a fall of 0.1% from the prior year.
Nick Dunning, group commercial director at Countrywide plc, said: “The Countrywide Quarterly Lettings Index has once again given us the most comprehensive insight into the rental market across the UK and has highlighted some revealing facts. It shows that the rental market continues to develop strongly with some interesting movement in market dynamics from London to the regions.
“The growing average monthly rents across the UK shows the increasing attractiveness of regions outside London. London remains a good place to buy property, but investors are venturing further afield for investment opportunities.
“Scotland is an anomaly to this – with falling rents and increased arrears being compounded by recent legislative changes, investors might be deterred from buy-to-let investment.”
Rent movements, yield and arrears levels in the UK
|Area||Q1 2013 average rent (£)||Rent year-on-year increase/ decrease (%)||Q4 2012 average rent (£)||Quarter-on-quarter increase/ decrease (%)||Yield (%)||Arrears > 30 days (% rent roll £)|
|East of England|
The survey showed that rising rents and stabilising house prices are making rental yields highly attractive to investors, with the average yield at 6.2%. The highest rental yield was in Wales at 6.7% closely followed by both the North and Midlands at 6.5%. The lowest rental yield was in Inner London at 4.6%. Based on the average yield and the Q1 2013 average monthly rent of £835, the average investor could expect to make a total annual return of approximately £10,000 per property over the next 12 months.
In addition, buy-to-let investors would be looking at how long it takes to rent a property. Countrywide plc found that the average time it took to let a property in the first quarter of 2013 was 14.5 days, which is marginally higher than last year when it was 15.1 days. At 13.4 days, properties in the South rented the fastest in Q1 2013; Scotland was the slowest region as it took on average 19.3 days to rent a property.
Dunning added: “The growth in the residential lettings market appears to be taking hold. Rising rents, falling arrears and fast lettings due to high demand for rental accommodation is acting as the perfect recipe for investors and landlords. With attractive returns on offer, investors are returning to property as a long-term investment option over savings with meagre returns and shares with unpredictable volatility. The buy-to-let market is booming.”