Landlords struggle to raise rents

Just 42% of residential landlords expect to raise rents in 2014 as they look to keep up with inflation and look to recover the costs of necessary maintenance. One third will lift rents by 1% or more, with an average estimate of a 3.7% increase, according to research by LSL Property Services. According to the company’s buy to let index, rents are rising at an average 1.5% currently, barely keeping pace with retail price inflation.

“Even with an increase in rental properties available, demand in the private rental sector continues to outstrip supply in many areas, especially in London,” said David Newnes, director of LSL Property Services. “In the months ahead, this will enable landlords to push up their rental prices when letting their properties, putting a stop to inflation from eating into their rental income.”

Landlords cite inflation, maintenance costs and rising insurance premiums as items putting pressure on their returns from renting a property. On average, rental properties yield around 5.3%, with an additional element of capital appreciation, as property sale prices advance ahead of inflation rates.

LSL, the company behind e.surv, Your Move, Reeds Rains and several other estate agency brands, also note that voids are falling. New tenancies agreed in December were up 7.7% on a year previously, helped by solid tenant demand and meaning that tenants are now having to compete and take quick decisions to secure the best rental properties. “Landlords can minimise void periods by talking openly with their tenants about their future plans, in order to prepare for when the property might be empty,” said Newnes. “Overall, there’s an air of optimism surrounding the rental market, now that inflation is firmly back on track as wage expectations start to improve.”

Newnes sounded one note of caution about the current market, though, and in particular the level of new build supply in the market. “With demand rising, greater emphasis must be on the supply of homes. While the government plans outlined are a welcome move, this is only the start of the long term solution.”

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