A gauge of U.K. residential rents climbed for an eighth month in September as a lack of mortgages and affordable housing for sale drove letting fees in London to a record high, LSL Property Services Plc said.
The average monthly rent for a home in England and Wales rose 0.5 percent to 689 pounds ($1,106) from 685.70 in August, the Newcastle, England-based company said in an e-mailed statement today. That’s the highest since LSL started compiling the index in June 2007. The average fee in London gained 1.1 percent to 972 pounds, also a record.
Potential homebuyers are putting off purchases due to concerns about the impact of the government’s biggest budget squeeze since World War II and a dearth of affordable finance, LSL said. Landlords are benefitting from a lack of properties to let as banks curtail mortgages for buy-to-let transactions, reducing the number of rentals entering the market.
With “uncertainty over the direction of the economy, many buyers are choosing to remain in rented accommodation for longer,” David Newnes, estate agency managing director of LSL, said in the statement. “This has turned the buy-to-let market into a landlord’s market, and many renters face increasing rental costs while they delay their house purchase.”
The average rental yield remained at 4.9 percent in September as higher rents were matched by “modest” house-price growth in the past three months, LSL said. The increase in rents means that an investor buying property to let can now expect an annual return of 9.2 percent, the company said.
Unpaid rent in the U.K. totaled 230 million pounds in September, compared with 266.3 million pounds the previous month, LSL said. That’s the equivalent of 10 percent of all rent across the country, it said.
Amongst the 18,000 properties surveyed by LSL for the gauge, monthly rents ranged from 4,117 pounds for an apartment in London’s Kensington area to 250 pounds for a terraced house in Huddersfield in northern England.
Rightmove Plc, the U.K.’s biggest property website, is advertising a four-bedroom apartment with access to a communal garden and tennis court in Cadogan Square in Knightsbridge near Kensington in central London for rent at 2,100 pounds a week. Website FindaProperty.com showed a four-bedroom detached house in Huddersfield for rent at 695 pounds a month.
“The supply-and-demand imbalance is particularly severe in the capital,” LSL’s Newnes said. “London is emerging as a different market entirely from the rest of the U.K.”