Jobs boom helps landlords but hurts tenants

19 January 2015

Landlords in Leicester, Southall and Cambridge have enjoyed a massive rise in rental income, according to new research.

In Leicester, rents rose by 45%, with the average rent coming in at £611, compared to just £421 in 2013, the Homelet Rental Index has revealed.

Rents in Southall went up by 38% and in Cambridge by 24%. Other towns with high rental market growth are Gloucester, Chelmsford, Swindon, London, Telford, Ilford and Harrow.

But some towns and cities have witnessed a significant drop in rental income. Colchester, for example, has seen the biggest drop with rents falling by 24%, while Croydon is not far behind with a 23% drop in rental income. Other areas that have not fared well are Brighton, Romford, Manchester, Cardiff, Belfast, Huddersfield, Lincoln and Leeds.

Looking at the monthly figures, rents fell in many regions of the UK in December but there was positive growth in 10 out of 12 UK regions when compared with December 2013. Homelet found that the average rent in the UK last year was £867, compared to £813 in 2013.

Meanwhile, figures from estate agents Your Move and Reeds Rains are equally positive, revealing that rents have risen by 3% during 2014. Their findings put average rents in England Wales at £767, compared with £745 in December 2014.

Rents are higher than a year ago in eight out of 10 regions of England & Wales, with the East of England leading the way with a 7.6% annual increase. Rents also rose by 6.2% in the East Midlands and by 4.1% in London over the last 12 months.

Yields and returns

The gross yield on a typical rental property in England & Wales now stands at 5.1% as of December 2014, according to Your Move's and Reeds Rains' findings – down from 5.3% in December 2013.
Allowing for price growth and void period between tenants but before mortgage repayments or maintenance is taken into account, total annual returns on an average rental property are now 11.1% over the 12 months to December 2014. This is up on the previous year when total annual returns were 9.2%.

Adrian Gill, director of Reeds Rains and Your Move, said: "There appears to be a new fire in the rental market as we enter 2015. Demand for homes to let is hotter than we would normally expect at this time of year.
"In particular, a jobs boom across the eastern regions of England has seen a larger than usual number of people relocating in the winter months. This has pushed up rental prices in these regions even further."

Martin Totty, chief executive of Barbon Insurance Group (which owns Homelet), added: "The demand for rental property is increasing, and we expect it to continue doing so in 2015 as large numbers of people are priced out of buying.
"However, the data also points to some big differences in rental market performance in 2014 from town to town. In locations such as Leicester and Cambridge, demand for rental property is outstripping supply. By contrast, Croydon and some parts of Essex are benefiting from a relative boom in new property building, easing the pressure on the local rental market and this is reflected by a drop in rental prices."


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