UK Rental Boom Down but Maybe Not Out

The UK rental market has felt a bit of a change lately. The typical seasonal slowdown running into December has continued on into this year, with February experiencing the 4th consecutive monthly decline in rents...

The UK rental market has felt a bit of a change lately. The typical seasonal slowdown running into December has continued on into this year, with February experiencing the 4th consecutive monthly decline in rents. The decline has been put down to more than a seasonal slowdown as it coincided with an improvement in the mortgage market and the first time buyer picture.

However, while rents fell on the month in February for the 4th consecutive month, the decline was much slower than previous months with rents just 0.1% lower than January, and rents rose in half the regions. On top of that rents were still 3.3% higher on the year, which is an acceleration on January's 2.8%.

The strongest monthly rental inflation was a 1.8% rise in Wales, followed by the North East where rents were 0.9% higher than in January. London’s rents also returned to growth – rising by 0.5%. The fastest falls were in the North West, at 1.3%, followed by a 1.1% drop in the East of England and a monthly fall of 0.7% in the South West. The south west was also the only region to see rents fall on an annual basis with a decline of 1.2% compared to February 2011, which is surprising given the 3.3% growth recorded on the year on the neighbouring South East. London continues to reign supreme with the biggest annual growth of 6.2%, which is now a much wider gap compared to the second-placed south-east.

The north of the country continues to present a potentially attractive opportunity for buy to let investors, where rent growth continues to impress and prices are much lower leaving impressive yield potential.

This is particularly true of the north-west, where yields in February were the highest in England and Wales at 7.2%. This is supported by its annual rent growth of 2.8%, which is the joint-third highest in the index along with East England.  However, on the month rents fell 1.3% in the north-west. This makes the east Midlands slightly more attractive, with lower yields at 6.1% made up for by stable monthly and annual rent growth at 0.2% and 2.4% respectively.

- Monday 25 March 2013

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