High rental yields for UK continue
A number of reports in recent weeks have confirmed that rental yields are still rising in the UK. In December the Royal Institute of Chartered Surveyors (RICS) released their latest Residential Lettings Survey which showed that in the three months to October, 15% more surveyors reported a rise in rental yields, albeit with a more moderate increase than earlier in the year. This was the seventh consecutive quarter when rental yields rose in the UK, due to a combination of rising demand and rising rental values.
Economic concerns around the Eurozone & the knock on effect to the UK has also seen many prospective buyers deciding to wait until the climate changes for the better before committing to buying a new home. Buyer confidence has suffered as a result of the various statements issued by European Governments warning of troubling times ahead with renting seen as a safer option for many. RICS spokesman James Scott-Lee commented that “the disappointing economic message communicated by the Chancellor in his Autumn statement and the prospect of further job losses in some sectors & areas over those previously envisaged is likely to continue to underpin the residential lettings market in the near term”.
The ongoing lack of available finance in the mortgage market has also inevitably pushed more people into the rental market and the imbalance in tenant demand over supply of available properties has also pushed rents up, increasing yields for landlords. Mr Scott-Lee stated that “in some parts of the country the imbalance between demand and supply for rented property suggests that for the foreseeable future landlords will have a good if not increasing return on their investments in comparison with other mainstream options”.
Despite the fact that there are more tenants than properties, new landlord instructions did increase in the three months to October by approximately 10%, which according to RICS represents the fastest pace of new landlord instructions since April 2009. Whether this is enough to stem the rising rents remains to be seen but it is unlikely to make a great deal of difference.
RICS Chief Economist Simon Rubinsohn confirmed that the UK rental market will “remain firm” throughout 2012 although he predicted the increases in rents we have seen over the past year may slow down. Estimations from Savills however have suggested that the cost of renting could rise by over 20% in the UK market over the next five years.
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