Average rents increased in most areas of England and Wales in July, up an average of 0.22% month on month and 3.1% year on year to £874, according to the latest index.
A fall in stock available to rent is causing rental values to rise with nine out of 10 regions now having seen an increase in the last 12 months, according to the Your Move buy to let index.
Only the South West saw rents fall in the year to July with a decrease of 2.2% to £667 per month and the strongest performance was in Wales where rents have grown by 4.3% in the last 12 months to an average of £595.
Three other areas saw growth of more than 3% in the last year. In the South East rents increased by 3.6% to reach an average of £884 while in the East of England the typical rent is now £873 per month after 3.3% growth and in the North West they rose 3.1% to an average rent of £630.
In London rents have grown 1.2% in the last 12 months to reach an average of £1,283 but this headline figure masks big differences depending on the location of the property. For example, the average property in Travelcard Zone 2 cost tenants £1,831 a month compared to a typical price of £1,161 in Zone 4. Yet high travel costs mean the price benefit of living in the outskirts of London has been reduced.
The report says that rent rises could be down to the introduction of a range of government policies directed at the lettings market. The effects of these policies, such as the extra 3% stamp duty on additional homes and the removal of mortgage relief for landlords, have restricted the supply of new lettings properties coming to the market.
Despite rents increasing, most landlords saw their yield levels remain flat between June and July. Wales was the only area surveyed to see the average return decrease month on month, slipping from 4.8% to 4.7%. In the nine remaining regions, yields were the same in July as they were in June and led to the average yield across England and Wales being 4.4%.
On a yearly basis, however, each of the regions surveyed recorded lower yields than 12 months ago. Between July 2016 and July 2017, the average yield across England and Wales dropped from 4.9% to its current level.
Landlords in the north of England continue to enjoy the highest return on their investment, despite the amount of rent they receive being lower than in other areas. Investors in the North East received an average yield of 5.2% during July, higher than anywhere else. In the North West the typical landlord earned 5% on their rental property. These were the only two areas to record yields of 5% or greater in July.
‘We are now starting to see the real impact of the Government’s stamp duty revision, plus the additional tax changes which have hit landlords hard. The outcome has been a decline in the number of rental properties on the market and this has had the effect of pushing up prices for tenants,’ said Richard Waind, director of Your Mov.
‘Tenants in London face a different issue as rapidly rising travel costs are increasing the overall cost of living in the suburbs, despite rents generally being cheaper than central areas. The Private Rental Sector, however, could still be seen as an attractive opportunity for investors, with the North East and North West in particular seeing strong growth,’ he pointed out.
‘Although buy to let investors are preparing for the new PRA changes coming into effect in September, it’s clear that there are still people who believe that, property remains a viable investment option,’ he added.