- Cooler property purchase market trims landlords’ total returns – to 10.2% in year to May before costs
- Tenant rental arrears worsen to 9.3% of rent due in May, even as cases of most serious arrears improve
The latest Buy-to-Let Index from letting agents Reeds Rains has reported that, in May, the average rent across England & Wales stood at £792 per month – down 0.2% from April. Taking into account both rental income and capital growth, but before property-specific costs such as maintenance, it has led to the average existing landlord in England and Wales to receive total returns of 10.2% over the twelve months to May. This is slightly lower than 10.7% seen a month before, over the twelve months to April, as property price growth has abated.
However compared to the year ending May 2015, when this measure stood at 9.4%, landlords have seen stronger returns over the most recent twelve month period. In absolute terms this means that the average landlord in England and Wales has seen a return of £18,769 over the last twelve months, before any deductions such as property maintenance and mortgage payments. Of this, the average capital gain contributed £10,057 while rental income made up £8,712 over the twelve months to May.
At the same time tenant finances have deteriorated in May, with 9.3% of all rent due in the month standing in arrears of one day or more. This compares to 8.1% in April 2016 – yet the chance of more serious problems developing has fallen.
Tenants are now less likely to fall serious behind on their rent (two months or more). In the first quarter 3,100 fewer households were in serious rent arrears defined this way, compared to Q4 – or a 4% fall.
Adrian Gill director of lettings agents Reeds Rains, comments: “Tenants are benefiting from a resurgent jobs market, responsible for the long-term trend in household finances away from the bad old days of the recession. This is having a particularly positive impact when it comes to the chances of tenants building up more significant arrears – or ultimately losing their home. Such progress, even in absolute terms, is hugely encouraging as the private rented sector continues to grow rapidly.
Source: England & Wales Buy to Let Index, May 2016