Rental Prices Exceed £1,400: Is It the Right Time to Invest in Buy to Let?
The average rental price for properties in England has now climbed to £1,470. This represents a significant 7.5% increase from the previous year, surpassing what many market analysts had anticipated as a potential ceiling for rental costs set last summer.
Year-on-Year Rental Increases: A 7.5% Surge
In July, which marks the beginning of the peak lettings season, rental prices surged by 7.5% compared to the previous year. In July 2023, the average rental cost was £1,367—an all-time high at the time. Now, with the latest figures showing an average of £1,470, a new record has been set. This is the first instance the Rental Index has reported a national average exceeding £1,400.
Regional Rental Price Trends: South West Leads the Way
Regionally, the South West experienced the most significant year-on-year increase, with rents rising by 10%. Conversely, the West Midlands saw the smallest year-on-year change, with rents increasing by a modest 4% from July 2023.
Significant Monthly Rent Hikes Across Regions
Between June and July 2024, England saw a remarkable 20% increase in rental prices, driven by high summer demand. Rents soared from an average of £1,225 in June to £1,470 in July. The North West and South West recorded exceptional increases, with rents in these regions climbing over 40% from the previous month. Other areas, including the East Midlands and North East, also experienced substantial month-on-month rises exceeding 20%, while Greater London and the West Midlands saw smaller increases.
Reduced Void Periods Reflect Market Dynamics
In response to the rising rental costs, void periods—the average time a property remains vacant between tenancies—have decreased significantly. In June, the average void period was 17 days, which dropped to just 11 days in July, representing a 35% reduction. The North West and South West now have the shortest void periods at 5 and 7 days, respectively, marking a 12-month low. Despite this, void periods are still longer than they were in July 2023, when the average was 9 days.
Tenant Incomes Rise, But Still Lag Behind Rental Costs
Amidst rising rental prices, tenant incomes have also seen an increase. The average salary for renters signing new leases in July rose from £36,800 in June to £38,086, reflecting a 3.5% increase. However, this wage growth does not fully match the rate of rental price hikes.
William Reeve, CEO of Goodlord, comments, “The July figures reveal a striking rise in rental prices. While we have been accustomed to gradual year-on-year increases since 2020, last summer's record-setting figures seemed poised to stabilise. Instead, July's data has shattered previous records and established a new benchmark for the rental market’s peak months. Shortened void periods further illustrate the tightening supply. For tenants, the new Government’s efforts to expedite house building are eagerly anticipated.”
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