London rental rates fell in December but buy-to-let investors can look back on 2011 as a year when rents soared, a survey has revealed.
The amount paid by tenants in the capital dropped by 0.9 per cent last month, the first time rental rates have fallen since December 2010, when they went down by 2.3 per cent, according to LSL Property Services’ Buy-to-Let Index.
The average property now costs £1,023 per month to rent in London, significantly higher than the average of £711 across England and Wales.
Rents fell in seven regions across the country last month. The biggest declines were seen in the South East, where they dropped by 1.9 per cent, and in the North East, which experienced a fall of 1.4 per cent. However, rents went up by 0.8 per cent in the East Midlands and by 0.1 per cent in Yorkshire and the Humber.
Buy-to-let investors in the capital will be cheered by the news that London had the country’s fastest rising rents on an annual basis. Tenants in the capital experienced a 5.6 per cent increase in rents over 12 months, while the East and South East of England had the next largest rises.
LSL Property Services commercial director David Brown said: “The seasonal relief continued for tenants as rents dipped again in December, but the drop-off was much smaller than a year ago.
“The rental market was sheltered from the full impact of the seasonal lull by the strength of underlying tenant demand as many prospective renters took the opportunity to move in the run-up to Christmas at a time when the market is traditionally less competitive.
“With the mortgage market facing challenges from the eurozone crisis and the sluggish wider economy, credit conditions are unlikely to ease significantly in the coming year.
“As a result, the number of first-time buyers able to secure finance isn’t about to rocket up, and demand for the limited supply of rental accommodation will continue to rise. It won’t be long before rents will resume their upward march.”
The average yield on a London property stood at 5.1 per cent last month, up from the 4.9 per cent from December 2010. Rental yield is the amount of income an owner receives each year as a percentage of the property’s total value.
However, London’s average yield is slightly below the national average of 5.2 per cent, and far behind the North West (6.9 per cent) and Yorkshire and the Humber (6.5 per cent).