The news that landlords are making their highest profits in four years will not come as much of a surprise to any tenants who are planning removals between rental properties in one of the higher priced parts of the country, but it will be welcome news to anyone who is investing in rental properties.
The cost of renting a typical home in England and Wales rose to £745 a month during May, a rise of 0.6% over the last month. Although this is a remarkable rise over such a short period, the good news for renters is that the rise has not been consistently sharp. The total rise over the last year was not quite twice this amount, at 1.1%, which means that rents have been growing at less than the 1.5% cost of inflation. On average, tenants are now paying just £8 more than they were a year ago, according to the estimates of LSL Property Services, so if you are looking for a new property to rent, you shouldn’t see much of a difference in the prices that are available in your area. In fact, the prices that you are being charged may have become cheaper in real terms, even if the actual figure seems to have increased, because the rise has been below the rate of inflation. You might actually be saving a few pounds even before your removals van delivers your belongings to your new home.
However, although rents have not matched the rise of inflation over the last twelve months, this does not mean that landlords are suffering. The profits being made on rental profits have just reached their highest levels in four years, if rising property prices are taken into account. Landlords made an average of 5.3% per property during the last year, based on rental charges alone. However, when the total return on a rental property was calculated, taking vacant periods between removals, property prices and other factors into account, the average annual return was 12.2%, the highest level in four years. The average landlord has made just over £20,000 over the last year, with £8107 of this profit coming from rent.