Rental prices finally drop, says LSL

Asking rents have dipped for the first time in ten months, according to this morning’s LSL index.

The tiny monthly drop of 0.4% means that on average, rents have gone up by 3.5% over the year.

The average rent is now £717 a month across the UK, but stands at £1,033 a month in London.

Surprisingly, perhaps, LSL reports an improvement in tenant finances, with 9.3% of all rent late or unpaid at the end of November, compared with 10.1% at the end of October.

The survey estimates average yields for landlords at 5.3% but warns that landlords stand to make a loss on their properties.

It says: “The average total annual return per property in November was 2.2%, compared to 1.4% in October. In cash terms, this was an average of £3,726 – equivalent to £7,700 in rent with a capital loss of £3,974.

“If property prices maintain the same trend as the last three months, an investor could expect to make a total annual loss of 0.7% over the next 12 months – equivalent to £1,144 per property.

Paul Jardine, receiver at Templeton LPA, said: “There are fewer tenants actually behind with their payments in some shape or form. In part, this is down to a tougher line landlords are taking to ensure that new arrears cases are dealt with promptly.

“Nevertheless, landlords should take note of the deteriorating labour market. Unemployment is now at a 17-year high and likely to rise further. As it climbs, a growing number of tenants’ household finances will come under strain, and overall tenant arrears are likely to climb in the coming year.”

Duncan Kreeger, chairman of bridging company West One Loans, which lends to landlords, said: “Life for landlords is not as sweet as it looks.

“For instance, the market for buy-to-let loans only looks in rude health when compared to the ultra-turgid residential mortgage market. 

“In fact, lending to property investors is very low by historic standards. There were 34,500 buy-to-let loans in Q3 2011. That’s chicken feed set against the 60,000 loans written in Q3 of 2006.

“Although it’s not as hard for buy-to-let investors to secure mortgages as it is for first-time buyers, it’s still very difficult.”