Home > Rents at risk of 'over-heating' in South, says Rightmove

Rents at risk of 'over-heating' in South, says Rightmove

Rents are over-heating in London and the South-East, where the high cost of properties limits landlords’ plans to expand.

Rightmove said that ‘serial landlords’ are more prevalent in the North, Scotland and Wales where properties are more affordable and average returns of above 6% are higher than in London and the South-East.

Overall, however, tenants seem resigned to rising rents, with 60% expecting to be paying more in 12 months’ time. In London, the proportion rises to 66% and in the South-East to 62%. But even in the region of lowest expectations when it comes to rent rises, 52% of tenants still expect to be paying more this time next year.

According to the latest Rightmove research, 31% of tenants in the South-East and 29% in London are already spending more than half of their take-home pay on rent. The national average is 26%.

Miles Shipside, director at Rightmove, said: “The view from the majority of tenants across the country is that rents are likely to go only one way, and that’s up.

“London and the commuter belt of the South-East have the greatest proportion of respondents predicting higher rents, suggesting that these markets are most at risk of over-heating and most in need of further investment from investor-landlords.

“The continuing heat applied to rents is a double whammy for the one in two tenants who would like to buy but can’t afford to.

“These ‘trapped renters’ are faced with the prospect of a downward spiral where spending more income on rent also means saving less for a deposit.”

According to Rightmove, buy-to-let lenders are most interested in landlords with big deposits and who have identified properties with attractive monthly rental income to monthly repayment ratios.

Average rental yields in the North-East are 6.5%, followed by the North-West at 6.4% and Wales at 6.2%. In contrast, investors in the South-East have yields of 5.6% and in London of 5.7%.

Shipside said: “For the most attractive and immediate rental returns, the North wins.

“Investors in London and its surrounds may eventually find that the streets are paved with gold, but they’ll have to wait and see what happens to capital values to find out.”

He added: “Lower entry costs further north also mean an investor can buy more property units, spreading the risk, rather than having all their eggs in one basket with a higher-value, single investment further south.”

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