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Void periods down, tenants staying longer, rents still increasing

November 22, 2012 | Landlord News  

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The quarterly ARLA survey, which is the largest of its kind, gathering data from 525 letting agents and 1,168 investor landlords, covers many areas, such as yields, void periods, rents, regional differences, and more.

It was found that the average weighted rental return for houses has increased from 5.1% in Q2 to 5.2% in Q3. But the average rental return for flats fell from 5.4% to 5.2%, the reverse of what was seen three months ago.

The average proportion of respondents for all property types who said they think achievable rent levels have increased over the last six months rose from 45% to 48%.

The average value of a rented house has reached its highest ever level, with the overall capital asset value of rented houses seeing a rise of 1.9% over the last three months. Over the same period, the average value of rented flats has seen no change, remaining at its highest ever level.

Demand in the rented residential property sector fell slightly in terms of the overall proportion of respondents reporting that there are more tenants than properties available to rent, dropping from 58% to 55%, although this fall is almost entirely attributed to a 9% fall for Prime Central London.

The proportion of respondents who think landlords are buying more properties has risen by 1% to 22%. Those who think that landlords are decreasing their net investment in residential property by selling properties has dropped from 17% to 12%.

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Void periods are down to 2.9 weeks from 3.1, with the average number of new tenancies signed up going from 34 to 35, which is less than has been seen in past seasonal trends. Tenants of ARLA members are staying in their properties an average of 19.4 months, down from 19.7 months in Q2.

Over the last three months the average proportion of ARLA members’ offices’ portfolios that are made up of investment property has decreased by 5% to 51%, although the number of investment properties managed by ARLA members’ offices remained static at 135, from which it may be inferred that other areas of the property market are improving.

Rental properties coming onto the market because they cannot be sold is thought to be on the increase, with 40% of ARLA members’ offices believing this to be the case, a 5% increase on Q2. Semi-detached properties are still the most likely to be coming onto the market for this reason.

The proportion of ARLA members’ offices reporting an increase in the number of tenants struggling to meet rental payments in the last six months has fallen for the first time in 12 months, from 42% to 38%. Also, less tenants are seen to be haggling with their landlords over rents, with the proportion falling by 3% to 49%.

Reversing the change seen in the previous quarter, the proportion of ARLA members’ offices seeing an increase in tenants asking lenders for references on potential landlords to ensure they are financially viable increased to 10% from 7%.

55% of respondents said that none of their potential or existing tenant clients bothered to ask them if they are licensed, up from 54% in Q2, while it was just 39% when related to landlord clients, same as in Q2. 6% and 1% respectively said that all their potential or existing clients ask this question. Just 7% of respondents (same as in Q2) think that an increased proportion of potential or existing clients have asked this question in the last 12 months.

Would-be first time buyers who cannot get a mortgage are the most likely new prospective tenants (average ranking 1.7), while tenants who prefer renting come in second (average ranking 1.9). Least likely are those who have had their house repossessed (average ranking 3.7). The order of rankings for all prospective tenant types has not changed from the previous quarter.

The index found almost no overall difference in the rates of return between houses and flats, although houses outperformed flats in the north of England, while flats outperformed houses in the south of England, Scotland, Wales, and Northern Ireland.

The average rates of return for all types of property for a cash purchase (the return based on the purchase price of the property plus the acquisition costs) was found to be 9.05 (rising by 0.1 from Q2), while the average for a geared investment (the return based on the cash outlay in terms of cash deposit for the purchase plus initial acquisition costs) was found to be 20.99 (rising by 0.03 from Q2).

 

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