Stagnant Rents and House Prices Squeeze Landlord Profits

Low investment yields coming from stagnant rents and property prices are squeezing profits for landlords - with those in London suffering the worst. 

Although rents are still rising across the country, October 2019 reported a 1.3% increase means the figure has sat at the same rate since May, says the Office for National Statistics

The rise means a tenant pays an extra £6.50 monthly on rent priced at £500 monthly in September 2018. And that’s an average indication of how rents are moving - with some landlords gaining more and many coping with smaller increases. 

The rent analysis from the ONS shows the most significant annual increase was in the South West, where landlords have seen a rise of 2.3% year-on-year, those in London experienced a meagre 0.9% hike. 

The following best regions for rent growth were Yorkshire and The Humber (up 1.8%), the East Midlands (up 1.7%) and the South East (up 1.6%). 

The lowest rent gain was in the North East, with a rise of just 0.6% for the year. Stripping out the figures for the capital, rents across England, Wales, and Scotland were up an average of 1.5% in the year to the end of September, says the ONS. 

Average UK rents have risen 8% since the ONS started tracking changes in September 2015. 

London landlords were hit with a double whammy. Not only are rents rising slowly, but average house prices dropped 1.4% over the year to August. 

The average home in the capital is now worth £472,753, compared with £479,465 a year ago. 

Nationally, the ONS study shows that house prices increased a little -  by 1.1% in England to £251,233 and 4.5% in Wales to an average of £168,318.

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Investing in a private rented property can be achieved in a variety of ways. Sometimes landlords inherit a property that they then turn over to renting. Sometimes owners of properties become unintentional landlords because they are unable or unwilling to sell a property at the value the market currently dictates.