September was a good month for landlords in Wales and England. According to figures, home rental costs hit new highs, and landlords fetched record returns on their investments. September’s average rental rates rose from 7.9 per cent to 13.4 per cent, which amounts to £768 – a figure close to twice the rate of return on an investment property for the same period last year. Property values rising in tandem with the housing boom, and higher rental rates were the primary drivers that pushed annual returns on an investment property higher.
The average landlord earned £22,706 on their investment during the 12-month period – before deductions for mortgage repayments and maintenance. Approximately two thirds of the increase in return on investment was fuelled by property price growth (£14,327) and the remainder (£8,379) by higher rental tariffs.
If the rising trend holds, the projected outlook estimates total annual returns on investment properties to hit 22.1 per cent over the coming year, which translates to £40,489 per property.
Good for landlords, but what about tenants?
It’s not all bad news for tenants who’ve been hit with rising rental costs. Indicators show a slowing down of rising rental tariffs as the annual rate slowed to 1.5 per cent in September from 2.4 per cent in August. Landlords anticipate an average increase of 1.8 per cent over the coming year.
An increased demand for rental properties has fuelled higher rental tariffs outside of London and the South East, with the East showing the biggest annual rise in rental costs at 3.1 per cent, followed by the South West at 2.3 per cent. In other regions of the country rental costs have fallen. Average rents over the past year have fallen in the West Midlands by 2.4 per cent. They’re 2.3 per cent lower in the North East, and in Wales they’ve dropped by 1.1 per cent.
According to David Newnes, director of estate agents Reeds Rains and Your Move, rental increases broadly track inflation, and as inflation begins to slow, so too does the cost of renting a home. Autumn is always a busy period for the lettings industry, and forecasts are that rents in most parts of the country will have begun to slow down, enabling opportunities for tenants to pick up favourable rental deals.
More good news for landlords is the improved numbers for rent in arrears, from 8.5 per cent in September last year to 7.2 per cent. However, the figure for late rent during the month was a hefty £256 million.
If you want to get your piece of the landlords’ pie, ask Tepilo for advice regarding property rentals.
Featured image "A Lot To Let" via Pete Birkinshaw