Rent rises across England and Wales have slowed to less than half the current rate of inflation – and that is proof that Labour’s reforms are unnecessary, says LSL.
According to LSL, average rents as at April have risen by just 0.6% over the last year. The parent firm of Your Move and Reeds Rains says the average rent in England and Wales has risen by only £5 in the last 12 months, and currently stands at £741 per month compared with £736 in April 2013.
Rents in April are now at levels 12.9% higher than in January 2010. This is less than CPI inflation over the same period, which amounts to a total of 14.5%.
April was the 11th consecutive month where rent rises have been less than inflation.
David Brown, commercial director of LSL Property Services, hit out at Labour’s proposed “reforms” for the private rented sector, which include a ban on letting agent fees, longer tenancies and rent controls.
He said: “For a number of reasons, tenants would be worse off if all the proposed changes were imposed.
“Private renting is not in any form of crisis. Not only are rents rising more slowly than inflation, but the cost of private renting is also rising in line with household incomes. The last few years have seen rent rises dwarfed by inflation most of the time.
“Meanwhile the private rented sector has absorbed millions of households while other tenures have been unable to take up the slack.
“Poorly thought-through proposals could throw a spanner in the works. Firstly, rents would be higher. When tenant fees were banned in Scotland, rents rose 4% in the space of six months.
“This is ten times the rate of rent rises in England and Wales over the same six-month period, where such a ban had not been introduced. Before this they were mostly flat.
“Secondly, the equal treatment of potential tenants would also suffer. If tenant fees are banned and the landlord and letting agent have to bear the cost, there is every possibility letting agents and landlords will start pre-vetting tenants.
“Furthermore, if tenants have no advance financial commitment, then there is nothing to stop them pursuing multiple tenancies at the same time and just taking the first one that completes, dropping the others.”
He warned: “New landlords would be wary of entering the market or extending portfolios. Many would exit – and again, that would be bad for tenants.”
According to LSL, gross yields on a typical rental property have held steady at 5.1% in April, the same as in March. Due to higher property values, this is slightly lower than in April 2013, when the average gross yield on a rental property in England and Wales stood at 5.4%.
However, taking into account price growth alongside void periods between tenants, total annual returns on the average rental property are considerably higher, at 10.3%.
LSL also said that tenants’ arrears have improved. Last month they stood at £251m, down from £282m a year ago.
While LSL warned that landlords will exit the market if Labour presses ahead with its “reforms”, specialist lender Mortgages for Businesses claimed that most (60%) landlords are planning on expanding their portfolios this year. Only 3% are planning to cut back.
According to the Council of Mortgage Lenders, buy-to-let lending has boomed over the last year, with the number of loans in March up 56% on the year before.
According to the CML, there were 16,200 loans to landlords in March, up from 10,400 in March last year.