Rising Rents encourage more Buy to Let Investors

All around the UK, rental rates have been on the increase with London seeing one of the fastest increases over the past year. London’s annual increase in rental rates is higher than in any other region of England and Wales with average monthly rent on London properties rising to £1030 in October, a rise of 0.1 percent compared to September according to LSL Property Services’ Buy to Let index. In October, rental prices had risen by 5.7 percent compared to 4.6 percent in the West Midlands and 4.4 percent in the South East, whilst one of the lowest rises came about in the East of England with only a 0.8 percent rise over the last year.

On the back of higher rental prices, the rental yields for a property in London has increased to 5 percent in October, up from 4.9 percent in October 2010. In case you’re unsure what ‘Rental Yield’ is, it’s the rental income from the property over 12 months divided by the properties value. So a property worth £250’000 with a rental income of £12’500 a year would have a rental yield of 5 percent.

The figures for England and Wales as a whole showed that rental figures went up by a mere 0.2 percent in October giving an average rental price of £720 per month in October which is the lowest increase since February. However, even though the increase overall isn’t very significant, it has been good a good time to be a landlord with the average rental prices rising every month for the past 9 months to a new record high. However, yields have remained at a steady 5.3 percent.

With rising rents, it is an ideal time for investors to consider a move into property investment. With property prices below their historic peaks, average yields are showing a healthy return on investment for many existing landlords and those looking to get into property investment.

With banks still uneasy about lending to first time buyers, there will be plenty of tenants eager to move into rented properties. Due to this, it is likely to mean more first time landlords will be eager to enter the market to reap the rewards of high yield returns compared to the weak interest given on savings by banks. In the future, with more and more investors entering the market and an increase in the number of properties. Rental prices could start to stabilise.

Being a landlord doesn’t come with it’s difficulties, with more than 1 in 10 rent payments being paid late or going unpaid at the end of October. However, this was down 0.2 percent  compared with the previous 12 months average of 10.3 percent. Unpaid rent totalled a staggering £287 million in October which was up from the £243 million unpaid rent recorded in September.