Rents in the Midlands outpace London year-to-date, letting agents say

Rents in the Midlands outpaced those in London over the past year by a wide margin, as buy-to-let homes bought before tax changes reached the private sector, dampening growth in the capital, according to Your Move and Reeds Rains estate agents on Friday.

Rent rises in London slowed down to just 1% over the 12 months ending May, in comparison to its peak in September 2015 when rent were 11.6% higher than the previous year.

However, rent in east Midlands rose 7.3% in the same period, followed by the west Midlands with 5.5% and the east of England with 3.06%

The slowest average increase in rent was in Wales and the south east with a rise of 0.5% compared to last year. Rent is 1.7% higher than May last year.

The Buy-to-let Index from the estate agents showed the average rent across England and Wales is £792 per month as of May 2016. This represents a -0.2% drop since April, however, over the long-term rents have on average seen monthly rises of 0.4% for every May since the recession, they said.

Rents reversed their spring rise as a tide of homes bought before the stamp duty surcharge came to market. The change that took effect on 1 April meant you had to pay an extra 3% in stamp duty if you were buying an additional home.

Adrian Gill, director Your Move and Reeds Rains estate agents, said: “Landlords escaping a much larger stamp duty bill by completing their purchases before 1st April have now finished their repairs and paperwork, with these homes to let competing for tenants in May and into June. That short-term mismatch has made May an exceptional month, with excellent deals available for some prospective tenants.

He added: “The net effect will not be more properties to let – quite the opposite. If new regulations and taxes produce a drought of homes to let, then the overall shortage of housing in the UK will only bite harder for tenants. Meanwhile, this heightened shortage and possibly higher rents as a result could also protect landlords somewhat from the financial effects of more punitive rules and regulations.”

The average landlord in England and Wales has seen a return of £18,769 for the last 12 months (including, on average, capital gains of £10,057). In spite of rents dipping in May, rental yields are showing resilience thanks to a similar dip in property prices on a monthly basis.

The gross yield on a typical rental property is now 4.9% as of May 2016, the same as the 4.9% a month previously.

New London mayor Sadiq Khan was elected in May on the promise to tackle the rising cost of housing in the city. In his ‘London living rent’ scheme he wants to cap rent and base it on a third of average local income, not markets.

He also wants to establish a London wide not-for-profit lettings agency to promote longer-term, stable tenancies for tenants and landlords. London holds it breath.