The average rent paid in London now stands at £1,417 and is 102% higher than the national average of £701; according to the latest analysis conducted by BM Solutions.
Overall, the average monthly rent1 increased from £674 per month (pm) in H2 2012 to £701 pm for the same period in 2013. Renters in the South East face the second highest average rent (£913 pm), followed by those in the South West (£749). Renters in the North paid amongst the lowest rents in the country, (£501 pm), which is around a third of the average rent paid in London. This is closely followed by renters in Yorkshire and the Humber (£527) and Wales (£530).
Londoners also saw the greatest increase in rents in cash terms, at £135 pm. However, as a percentage of what they paid in H2 2012 renters in Wales saw average monthly rents rise by 10.6% (or £51 pm) in the half year to December 2013. This is closely followed by London (10.5%), and Yorkshire and the Humber (7.0%). In contrast, in the West Midlands average monthly rents fell marginally (-1.4%).
Whilst buy to let (BTL) investors have seen rental income grow by 4% in the second half of 2013 their profit is not increasing at the same rate. Average gross rental yields2 fell to 5.5% in the second half of 2013 from 5.6% compared to the previous year.
Investors in the north of the country recorded higher yields than those in Southern England in the second half of 2013. The highest returns were seen in the North (6.6%), and Yorkshire and the Humber (both 6.6%), followed by the North West (6.3%), and both Wales and Scotland (6.2%). The lowest rental yields are in London (4.8%), followed by the South West (5.1%) and the South East (5.2%). [See Table 1]
Phil Rickards, Head of BM Solutions, comments:
"Demand for rental accommodation remains strong, and in many regions this is outstripping supply which can lead to an upward pressure on rent prices.
"However our figures show that even with increasing rents, the average yield that investors are getting has remained static, which will be driven by the fact that the average price of a typical buy to let property has grown marginally faster that average rents."
The average deposit put down in the second half of the year by BTL investors is £49,146 for a typical BTL property. BTL investors in London put down on average £119,750 – over the four times more than those in the North (£27,710), the lowest. [See Table 2]
Buy-to-let purchases have been buoyant in the past year with transactions growing by 28% to 46,4303 in H2 2013 from 36,400 in H2 2012. Transaction numbers have doubled since hitting an all-time low of 23,030 in H1 2010; however, they remain half the level at the peak in H2 2006 (96,640).
Table 1: Average Rental Yield, Value and Rental growth by Region
Source: BM Solutions
Table 2: Average Deposit by Region
Source: BM Solutions