Private rented sector showing increased returns

Rents for houses in the private rented sector rose by an average of 4% in the three months to the end of February, according to the Association of Residential Letting Agents (ARLA).

Rents for flats rose by 2% over the same period. The average returns for renting out houses rose from 4.8% to 5% and the return from flats rose from 4.9% to 5%. The figures have been compiled following a survey of more than 400 letting agents. They show that the sector is still buoyant. The number of agents reporting that they have more tenants than properties is at its third highest level since the surveys began six years ago.

ARLA sees the figures as representing the start of a new housing cycle linked to house prices which have been falling in most parts of the country recently. ARLA’s head of operations said: “Whenever property prices soften or fall, rental demand, rents and yields all increase. As we begin a year of uncertainty in the sales market, it is inevitable that our member letting agents should report that they have more tenants than properties available for them.”

The increased demand is partly being driven by migration with the number of properties taken by immigrants, most of whom are from the European Union, showing a 20% increase. ARLA believes the supply of rented property will now have to increase to meet the rising demand.