Despite the spike in London property prices, private sector rents grew very little across in the capital, or across the wider UK last year.
Rents rose 1.0% in England, 1.2% in Wales and 1.3% in Scotland during 2012, according to figures produced by the Office for National Statistics. London registered a 1.6% rise, according to the regional splits of data provided.
However, research by inner London agents Hurford Salvi Carr, points to specific issues around the market in central London, where foreign investor interest has helped to drive up prices for apartments offered for sale.
“The story that is rarely heard in discussions about London’s housing markets is that there has been no inflation in rents for central London residential property. Rental values have been broadly flat for the past two years,” said the company in its 2013 review. And the agent predicts little growth in rents for the forseeable future.
The contrast is that, while sale prices are paid by foreign buyers, or domestic buyers looking to put cash into something that returns more than the pitiful returns on a savings account currently, rents are paid by real people, out of their wages. And those are not, in general, rising very much. As the agents put it;” There appears to be a ceiling on rental values – which we attribute to affordability – above which, many tenants decide to move further away from the centre of London, to get better value, in the form of a lower rent, or a larger space.”
For buy to let landlords, that means short term they should expect low returns from the rent their tenants pay. All hope is heaped on the property market continuing to rack up in value – providing a capital gain that will put the rental return in the shade over the medium to long term.