Landlords reap rewards as rents hit a record high

 
Elizabeth Fournier
LONDON rental prices have shot up by almost eight per cent over the last year, hitting their second-highest level on record and boosting landlords’ total annual returns above five per cent.

The average monthly rent in London is now £988 – just £4 below its all-time high of £992 in November last year. Prices have increased by 7.9 per cent since April 2010, and by 12 per cent in the past two years, according to the latest buy-to-let index from LSL Property Services.

London landlords in particular are seeing the benefits of the increase, with average total returns on properties in the capital hitting 5.1 per cent, as strong house prices help maintain healthy yields.

But falling house prices have balanced rising rents in other parts of the UK, with average returns at 2.1 per cent, down from 13.1 per cent in April last year.

“Competition is fierce and tenants are paying a premium to secure properties,” said David Newnes of LSL. “The average landlord is charging nearly £30 more a month than a year ago, and the rate of increase is unlikely to tail off.”

WINNERS AND LOSERS
Blockbuster profits from the UK’s largest residential landlord reflect the figures, as Grainger said yesterday that its profits had soared to £65.2m from £3.5m in the same period last year, largely on strong markets in London and the South East.

Grainger’s net asset value (NAV) per share, adjusted for deferred tax on revaluation gains, was 158p, up 13 per cent from September 2010.

The FTSE 250 company has increased its exposure to London recently, and assets in the capital now account for around 48 per cent of its residential portfolio.

Student letting agent Unite also said it was on track to meet targets this year, as reservations for its accommodation rose to 73 per cent from 62 per cent in March.

But rising rents have taken their toll on romance, with twice as many couples choosing to share rental homes with others to avoid higher prices than a year ago.

Sharing a room in a communal house works out 38 per cent cheaper than committing to sole occupation of a one-bed property, according to research from website easyroommate.co.uk.

One in nine renters now looking to flatshare with others will be also be living with a partner.