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Buy-to-let landlords: where in the UK are rents rising fastest?

The average UK rent has hit an all-time high of £970 a month

UK rents have hit a record high, but does this really mean landlords are turning bigger profits than before? 

A new report by HomeLet claims the average UK rent has reached £970 a month, up 2.4% in the space of a year and the highest level recorded.

But over the same period, landlords have faced higher tax bills and the costs of the new letting fees ban.

So, are profits looking up for buy-to-let investors?


Rents have hit a record high across the UK

New data from the referencing agency HomeLet claims that rent prices have increased in every region of the UK over the past year, with growth ranging from 0.2% to 3.5%.

This has resulted in the average UK rent on new tenancies hitting an all-time high of £970 a month.

HomeLet argues that a host of factors are behind the rise. First of all, it claims that landlords are looking to recoup higher costs, following a raft of tax reforms and the ban on letting agents charging fees to tenants.

This, combined with high demand for rented homes, wage growth and high employment levels, has forced up prices.

The agency also cites continuing uncertainty around Brexit, which it says has resulted in more people deciding to rent rather than buy a home.

Mapped: rental price changes around the UK

You might not be surprised to hear that London led the way for price growth, with average rents rising to an eye-watering £1,632 a month.

Northern Ireland saw the smallest increase, with the average cost of renting up by a single pound.

To find out how much rental prices have changed in the past year, hover over a region on the interactive map below.

Biggest annual increases in average rents

Region August 2018 August 2019 Annual change
London £1,632 £1,689 +3.5%
North West £717 £741 +3.3%
South West £826 £852 +3.1%

Smallest annual increases in average rents

Region August 2018 August 2019 Annual change
North East £526 £531 +1%
South East £1,055 £1,064 +0.9%
Northern Ireland £663 £664 +0.2%

Are prices rising right now?

While yearly prices are rising across the board, four UK regions saw month-on-month falls between July and August.

The biggest drop came in Scotland, where the average rent fell by 1.2%, or £9 a month.

Region July 2019 August 2019 Monthly change
Scotland £679 £671 -1.2%
Northern Ireland £671 £664 -1%
South West £855 £852 -0.4%
Wales £637 £636 -0.2%

Are costs increasing for landlords?

Higher rents might seem a good thing for landlords, but they don’t always mean higher profits.

Over recent years, it’s become increasingly expensive to be a landlord with taxes, licensing schemes, lending rules and new legislation squeezing margins.

Let’s take a look at some of the key areas that have an impact on landlord profits.

Taxes for buy-to-let landlords

More than three years have passed since the introduction of the additional rate of stamp duty for buy-to-let investors, and changes to mortgage interest tax relief now top the list of landlord concerns.

When landlords file their returns for the 2018-19 tax year ahead of next January’s deadline, they’ll only be able to deduct 50% of their mortgage interest when calculating their profits.

And things are set to get worse. From the 2020-21 tax year, mortgage interest tax relief will be cut entirely and replaced with a flat 20% credit, which will hike tax bills for higher and additional-rate payers.

These changes, coupled with the removal of the wear and tear allowance, and the costs of new local licensing schemes have seen some landlords sell properties or leave the sector entirely.

Letting fees ban

In June this year, letting fees were banned in England, with Wales following suit at the start of this month.

This means that landlords now need to pay for referencing and inventories, which may have prompted some investors to increase rent prices on new tenancies.

Martin Totty of HomeLet says: ‘Many experts had predicted [higher rents] as the inevitable consequence of banning letting agents and landlords from charging upfront fees to tenants.

‘Faced with higher expenses, higher taxation and greater regulation, savvy property owners were always likely to seek to recover these increased charges.’

That said, the changes were welcomed by many tenants and tenancy rights’ groups, including Shelter, who believe the fees were excessive, hard to justify and putting families under financial strain.

Buy-to-let mortgages

There is some comfort, with buy-to-let mortgages currently enjoying something of a boom.

Data released earlier this week by Mortgage Brain showed that the number of mortgage deals available to landlords has increased by 11% in the space of a year.

Costs are dropping too. Mortgage Brain says that falling rates mean landlords with a 40% deposit can now save £144 a year on a £150,000 mortgage, when compared with three months ago.

The graph below shows how average buy-to-let rates have changed over the last year:

For existing landlords, lower rates can mean cheaper remortgaging deals. With this in mind, if you have the opportunity to refinance your portfolio, now could be a good time to speak to a broker about getting a better deal.

Advice for first-time landlords

Becoming a landlord isn’t a no-brainer these days, but there’s still money to be made for savvy investors who take their time and make rational, considered decisions.

The key thing is to keep a level head and always consider both capital growth and rental yields before selecting an investment property.

That’s because properties come in all shapes and sizes, and at all price points, and a 1% increase in value on a £400,000 home in London isn’t the same as a 1% increase on a £150,000 home in the North East.

And on the flipside, a high value home won’t always get you a better rental yield than a cheaper property.

Investing in buy-to-let property is all about doing your research on the local market (including prices, yields and tenant demand) and carefully considering your financial exposure and appetite for risk before taking the leap.

You can learn more about the key considerations of property investment with our buy-to-let advice guides, including the process of becoming a landlord, employing a letting agent and getting a mortgage.

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