Advertised rental prices increased by an average of 1.9% across Great Britain in 2012, according to Move with Us’s analysis and review of the 2012 rental market.
The average rental rate rose by £37 per month, reaching a 12 month high of £976pcm at the end of October.
“The underlying value and return from rental properties has been robust during 2012, in marked contrast to the poor returns gained from personal savings,” said Robin King, director of Move with Us.
“Buy-to-let mortgages made a welcome return, with applications rising by 8%.”
Growth in advertised rental prices in London was slightly ahead of the UK average, rising by 3% in 2012. Rents increased much faster than expected in April, as property owners tried to capitalise on the Olympics. Local rental markets were flooded with short-term lets charging as much as £3,000 per week, though price levels fell back in line when the Olympics finished in August.
The region with the largest change in rental rates was the North East, with advertised prices increasing by more than 13% in October and November alone.
Another region prospering was Yorkshire and Humber which experienced large increases in advertised rents, around 7%, when compared to others in Q3. It remains however, one of the cheapest regions to rent in the UK, with average advertised rents at just under £600 per month.
Move with Us said that traditionally the rental market experiences lower demand over the holiday period and then into the early part of the subsequent year where a seasonal fall of roughly 5% in advertised rental prices is expected. This year appears to be following this trend, with several regions experiencing decreases in rent. Current conditions seem to be a feature of the rental market growth cycle, with an initial decline in prices followed by steady price increases throughout the following year.
Gross rental yields have remained at 5% throughout Britain in 2012, with the majority of regions returning an average yield of around 4%. Returns have remained stable as both house prices and rents have increased at similar levels. Overall, this suggests that buy-to-let properties were a worthwhile investment in 2012, Move with Us said.
Higher property prices and high demand for rental property meant that London continues to lead in terms of yield, with a return of 6.1%. However, the lower entry costs in the North East and strong yield make it an interesting alternative region for investment.
King added: “Stable yields and rising rent values throughout the year have increased revenue in most regions. Investors are increasingly holding properties for longer periods with tenants staying for longer, house price gains, more debt repayment and improving absolute returns. These conditions look set to continue in the medium term making selective investment in rental property attractive.
“Advertised rents in the North East of the country have increased the most, while other areas of the country have not experienced a large amount of change. Relative to last year, rents increased by roughly two per cent. Though 2012 has finished with a slight decline in advertised rents, the year has been in-keeping with the cyclical nature of the British rental market.
“Overall, advertised rental prices in 2013 are projected to continue to increase at a similar rate to 2012. However, they are likely to remain below Q3 2012 levels until April of next year. Yields are expected to remain at 2012 levels, as rental prices will consistently react to changes in average property prices.
“This, combined with rent increases in the majority of areas, could increase the revenue generated by rental properties. The current cyclical trend suggests that the average advertised rental price will remain below £1,000 next year and are likely to peak at around £990 in 2013.”