Is a Lack of Wage Growth Holding Rents Back?

Are wages holding back rent increases?

Are wages holding back rent increases?

Is a Lack of Wage Growth Holding Rents Back?

Unlike property price reports, rental reports are all in agreement that rents have slowed substantially towards the year end.

Many believe that the cost of living crisis is holding back any further growth of rental income for landlords, which is good news for tenants!

As rents aren’t rising – it means new investors are likely to secure lower yields and therefore need to be very sure buy to let investment is the right vehicle for them.

Report Headlines

Here are some key headlines from some of the key voices in the market;

Belvoir Lettings
Average rents for all offices trading over the last five years in December 2013 were £683, which is £2 less than November 2013. (Dec 13 – England, Wales & Scotland)

Acadata/LSL
Rent rises slow by half over course of 2013. (Dec 13 – England & Wales)

Paragon Group
Landlords look to the New Year with optimism. (Dec 13)

Homelet
Lowering London rents still 2.5 times more expensive than North East’s

SpareRoom
On average, rents have remained stable across the UK since last quarter, though they’re up 4% since last year. (Dec 13 – England, Wales, Scotland & NI)

 

Average Rent Prices 2013

Average Rent Prices 2013

Rents Around the Regions

There is some very interesting figures relating to rents across the country in the regions;

Belvoir Lettings

“Feedback from the offices suggests that rents remain fairly static in the South East, South West and North West. In East Anglia and the East Midlands, average rents are recovering and in Yorkshire and the West Midlands rents have recovered. In London, the average monthly rent for December was £1,337, which is slightly down on the year to date average of £1,404 per month. (Dec 13)”

Acadata/LSL

“Seven out of ten regions saw rents fall on a monthly basis between November and December, in line with a monthly fall across England and Wales as a whole. The sharpest monthly drop was found in the South East, with rents down 2.0% since November. This was followed by a fall of 1.9% in both London and Wales. However, the North East and West Midlands experienced rent rises on a monthly basis – up by 1.5% and 1.4% respectively. Rents in the South West also rose slightly on a monthly basis, up by 0.7% between November and December. (Dec 13)”
Homelet “The North East was home to the largest monthly and annual decreases in average rents of 3.1% and 4.4% respectively. It now costs an average of £501 per month to rent a home in this region. Greater London’s average monthly rental amount lowered for a third consecutive month by 1.5% to £1,244. Average rental amounts in the North West are currently the highest on record after increasing by 2.7% during December. This region was also home to the largest annual increase in average rents of 8.9%. The East Midlands saw its average rental amount decrease for a fourth consecutive month. The West Midlands is home to record rental amounts too after the average cost of renting a home in the region increased by 4.7% during December to £628 per month. (Dec 13)”

As with the national picture, all reports are pretty much suggesting a slow down across the regions.

Claims of great or poor rental performance for the North East need to be read with caution – there is an argument that figures fluctuate too much and average rents, as a measure for the region, aren’t valid.

So it seems that rents are not rising in line with property prices which in turn means lower yields for us investors.

If this was interesting, check out another related economic article here .

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