Rent prices have started to fall, but landlords are still reminded to protect their rental income.
Rents have come down as the landlords that rushed to purchase properties ahead of the introduction of the 3% Stamp Duty surcharge on 1st April begin to rent them out, according to the latest figures from Your Move and Reeds Rains.
The average rent on a residential property in England and Wales fell by 0.2% in May compared with the previous month, to stand at £792 per month.
Annually, however, rents are 1.8% higher than in May last year.
The Director of estate agents Your Move and Reeds Rains, Adrian Gill, points out that the number of homes coming onto the rental market has seen the supply-demand imbalance narrow, which has had a major short-term effect.
“This is the equivalent of a flash flood for the rental market,” he says. “Just a month ago, rents were heating up and spring was in the air, but this has been put on hold as a tide of new properties to let has disrupted the normal dynamics of supply and demand.”
Although rents have fallen on a monthly basis, buy-to-let landlords are reminded that it is always important to protect your rental income. The best way to ensure peace of mind is with Rent Guarantee Insurance, which makes sure that you still get paid, even if your tenants default on the rent.
A breakdown of the Your Move and Reeds Rains figures show that rent increases in London slowed to just 1% over the 12 months to May, which is significantly lower than the peak seen in September 2015, when rents in the capital rose by 11.6% annually.
Contrastingly, rents in the East Midlands soared by 7.3% in the past year, followed by the West Midlands, at 5.5%, and the East of England, at 3.6%.
All ten regions of England and Wales recorded annual rent increases in May compared with the same month last year, albeit at a slower pace in many areas.
And although rents have dipped on a monthly basis, rental yields are still showing resilience, thanks to a similar drop in house prices over the same period.
The gross yield on an average rental property in England and Wales – before taking into account factors such as void periods and maintenance – was 4.9% in May, unchanged from the previous month.
Taking into account both rental income and capital growth, the average landlord in England and Wales saw total returns of 10.2% over the 12 months to May, just marginally lower than the 10.7% recorded in April.
In absolute terms, this means that a typical landlord in England and Wales has enjoyed a gross return of £18,769 over the past year, before deductions such as mortgage payments. Of this, the average capital gain contributed £10,057, while rental income accounted for £8,712.
Gill concludes: “Landlords are vital in matching an escalating demand for homes from tenants. Such a scale of demand doesn’t look set to change dramatically just because of a few tax tweaks, so professional and accidental landlords will always be an essential part of the solution.
“Financial rewards for investing in property, taking on risk and maintaining homes will have to reflect the importance of landlords for our economy and our society.”