Renters in the North West suffer biggest hikes

Tenants living in the North West have seen rents rise faster than anywhere else in England and Wales with the average monthly bill hitting £633.

Data from national letting agent Your Move showed the area suffered the steepest rental inflation over the past year at 3.6 per cent, pushing landlords’ returns up to 5 per cent.

It comes as stiffer tax and mortgage rules make being a landlord in London and the South East, where property prices are highest in the UK, far less profitable.

How much rent are you paying a month? Londoners still have to cough up over a grand.

Anecdotal evidence suggests this is pushing landlords to sell up in the capital and buy new rental properties further north where the cost of buying is lower, making it quicker to turn a profit.

Your Move’s data suggests most areas of England and Wales have seen rental price growth over the past year, although landlords outside of London are pushing rents up the most.

The average rent charged across England and Wales to tenants was £843 in September, higher than the £841 recorded last month and 3.2 per cent up on the same point in 2016.

How much rent are you paying a month? Londoners still have to cough up over a grand.

The East Midlands had an average rent of £646 per calendar month in September, a rise of 3.4 per cent compared to last year.

The East of England saw rents jump by 2.9 per cent in the 12 months to September with the average rent in this region now at £880 per month.

By contrast, prices in the South West have fallen by 2.2 per cent and in the North East they have dropped by 0.3 per cent. These were the only two regions to post a year-on-year fall.

In September the average rent in the South West was £669 while in the North East it was £536, the cheapest region in the survey.

Rents in London and the South East are still rising, albeit more slowly. London rents are already the highest in the country, with an average of £1,280 paid by tenants in the capital last month.

Martyn Alderton, national lettings director at Your Move and Reeds Rain, said: ‘Once again the strongest rent growth was found in the areas away from London and the South East.

‘As activity in the capital slows, prices and activity have risen in the north.’

Finances have got tougher for landlords over the past year as a range of tax reliefs have reduced and getting a buy-to-let mortgage has got tougher.

Tax relief on mortgage interest has begun falling from a maximum of 45 per cent and by 2020 will be replaced with a 20 per cent tax credit. The change means landlords operating outside of a limited company structure are being taxed on their revenue rather than profit.

It follows a hike in the rate of stamp duty paid by landlords purchasing new buy-to-lets, with all purchases made from April 2016 incurring a 3 per cent surcharge.

Mortgage lenders have also got stricter with most now requiring rental income to cover mortgage payments by a ratio of 145 per cent on an interest rate of 5.5 per cent – significantly more than the 125 per cent at 5 per cent that was typical this time last year.

It has seen landlords refocus on where to expand their portfolios, with lower property values and more scope to raise rents from a lower base in areas such as the North West making this a more profitable prospect for investment than London and the South East.

Property expert Kate Faulkner explained: ‘There is still a bit of a ripple effect happening price and rental wise, with London leading, now slowing and as the economic growth spreads to the Midlands and North, so are prices and rents able to rise.

‘We have a bit of watershed moment this year and next. Typically rents rise in line with wages and what people can afford to pay. The question is whether with increased costs, landlords will be able or willing to put through above wage growth rises.

‘It’s becoming apparent that most cities are well stocked with rental, whereas smaller towns don’t have as a mature market. As a result we have seen some larger rises in less mature markets, where the economy is strong, while cities have remained relatively stable and even seen some falls.’

London house prices are so high that even high rents in the capital doesn't yield a good return

London house prices are so high that even high rents in the capital doesn’t yield a good return

Yields achieved by property investors in the South East fell to 3.3 per cent in September from 3.4 per cent the month before, according to Your Move’s analysis.

This compares to the average yield in England and Wales which was steady at 4.4 per cent for a sixth successive month in September.

Yields are still lower than a year ago. In September 2016 the average return was 4.8 per cent.

This calculator shows the rental return on your investment property as a percentage of its value

Properties in northern areas continue to offer better returns than other areas. This month the average property in the North East had a yield of 5.1 per cent, higher than any other area in the country.

The North West was the only other region to post a similar return, it had a yield rate of 5 per cent last month.

Faulkner said: ‘There is no question that serious landlords are looking to buy up north due to the high cost of property prices/compliance in the South, making it harder for landlording to pay on new properties.

‘However, they need to be aware that they are unlikely to see the capital growth which they have down south over the past 10 to 20 years.

‘Some prices of city centre flats in areas like Leeds/Nottingham are still selling out at half what they were originally bought for.’

David Cox, chief executive of the Association of Residential Letting Agents, added: ‘There are still more than a quarter of tenants experiencing rent hikes every month – and that’s too high.

‘As summer drew to a close in September, demand increased in line with our expectations, and while it’s too soon to see the effect of this on rent costs, we know that when supply and demand are conflicting, rent prices will just continue to rise.’

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