Falling rent and monthly decline a concern

Falling Rent

Rental asking prices fell for the second consecutive month in December 2011, according to figures released from LSL Property Services. The company, who own leading chains Reeds Rains and Your Move, said in its findings that rent was down on average by 0.8% in England and Wales.

Monthly decline

A fall in rental prices was evident in seven regions within the two countries. The largest declines were seen in the South-East (1.9%) and the North-East (1.4%.[1]) Rents in London were also down by 0.9%, the first time that rents have fallen in the capital since December 2010[1].

Annual rise

Despite the end of year decline, the report shows that rent has increased in all but two regions. Unsurprisingly, the biggest-rising rental increases were in London, with rents rising by 5.6% this annum.[2] The two regions where rents fell over the course of the year were the North-East and South-West.

Investors made an average yield of 5.2% per annum on their assets.[2] The total annual return per property was 3.7% on average for December, compared to 2.7% in November.[1]

If a similar trend pattern of the last three months were to be followed in 2012, then a property investor stands to make around a 4.8% annual return.[1] This would be the equivalent to around £7, 841 per property.[1]

Falling rent and monthly decline a concern

Tenant payments

Late or unpaid rent from tenants was up on the previous month, rising from 9.3% in November to 10.7% in December.[2] Seasonal increase however was down from the previous year, with rental arrears at 11.7% in December 2010.[2]

Concerns

The figures released by LSL Property Services have seen concern from some members of the industry. David Whittaker, managing director of Mortgages for Business, was one of those cautious on the findings. Whittaker said, ‘the problem we may face later this year is rental affordability.’[1]

Whittaker went on to address his concerns about rental arrears. He said that, ‘there will come a point when average rents are simply too high for many people to afford. We then face the danger of rising rental arrears and a surge in demand for affordable rental property.’[1]

David Brown, commercial director of LSL Property Services, was also apprehensive about the result findings. Mr Brown said that the difficult economic climate was likely to make credit conditions any easier in 2012. Brown remarks, ‘the number of first-time buyers able to secure finance isn’t about to rocket up, and demand for the limited supply of rental accommodation will continue to rise.

“It won’t be long before rents will resume their upward march.’ [2]

Need for support

Whittaker says that it is crucial that the, ‘Government support property investors and landlords and make it easier for them to invest in multi-unit freehold blocks and Houses of Multiple Occupation. These are the property types that will help ease the rental sector’s burden and avoid a situation where people are unable to buy but also cannot afford to rent – the consequences of which would be very dire indeed.”[1]

 [1] http://www.berkshirepropertymeet.com/rents-drop-for-second-month-in-a-row/

[2] http://moneyfacts.co.uk/news/buy-to-let/rents-fall-for-second-month-in-a-row200112/