Good news for landlords: Rents are rising faster than house prices

 
Emma Haslett
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Landlords have been hit by measures included in the Summer Budget (Source: Getty)

All right, so landlords might have been hit by the Chancellor's new rules on mortgage tax relief - but rents might just help to make up for that, after they rocketed 5.6 per cent in the year to June - the fastest rise since 2009.

Read more: Landlord it by Summer Budget proposals? Here's what to do next

That's according to a report by estate agents Reeds Rains and Your Move, which suggested rents are now rising faster than house prices on an annual basis for the first time since July 2013.

Monthly rents hit £789 in June, the figures showed, 1.4 per cent higher than the £778 recorded in May - despite inflation falling to zero per cent in June.

Surprisingly, London isn't the place where rents are rising most - that crown goes to the East of England, where prices rose 13.8 per cent in the year to June, the 15th month of consecutive rises.

The capital came second, with average rents of £1,241 and a 9.6 per cent annual increase, with the South East coming a "distant" third, with rises of 2.2 per cent to £778.

But yields remained steady at 5.1 per cent in June, unmoved from the same time last year. Meanwhile, annual returns fell to 9.2 per cent in the year, down from 9.3 per cent in May - and 11.9 per cent in the year to the end of June last year.

However, Adrian Gill, director of Reeds Rains and Your Move, called yields "resilient".

“Resilient yields backed up by rapid rent rises are a boon for landlords in otherwise trying times. Though the Summer Budget threatens to eat into their profits, record rents should provide buy-to-let investors with some comfort: the fundamentals still make being a landlord an attractive proposal.
“The fact that rents have risen faster than house prices should reinforce that the primary source of a buy-to-let investor’s income is rent rather than capital gains – house price growth is a welcome bonus, but not the be-all and end-all of rental property investment. Meanwhile, with mortgage rates so low, there’s rarely been a better time to invest in new property.”

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