The stability of the rental market appears to be improving as, although rents themselves are now rising more slowly, the total amount owed in arrears by tenants has dropped by £6 million in the latest
In the May 2013 LSL Property Services Buy-to-Let Index, the proportion of all rent in arrears fell to 8.2%, while the monthly increase in average rents was just 0.1%.
This is less than previous recent months, when average rents typically increased by around 0.3%, but still leaves the annual rent rise at 3.5%.
Tenants now have to find an average of £737 per month, up from £712 in May 2012, £696 in 2011 and just £667 in 2010.
May 2013 ranks as the third-highest average rent result on record, but the improved state of tenants’ finances meant there were 3% more new tenants than in the previous month, and 5% more than in May 2012.
David Newnes, director of LSL Property Services, says: “Looking further ahead, sustaining the increase in new buyers will depend on how many tenants are able to build big enough deposits to get a mortgage.
“With wage growth so weak compared to inflation and house price growth, it looks like deposits will become less affordable – which will keep demand for rented accommodation high.”
Landlords are also facing challenges due to the suppressed housing market though, which is keeping their capital growth low – meaning the total annual return on a BTL property actually fell in May 2013, to 5.3%.
Of the typical annual return of £8,747, less than £1,000 is currently from capital growth, with £7,797 coming from rental income.