Buy-to-let income soars 12% to nearly £1,000 a month

Buy-to-let rental income has surged ahead of both inflation and house price growth to hit an average of £977 a month.

The average UK rent on a new tenancy was 11.8% higher in the three months to July compared with the same period last year.

In London the average rent now stands at £1,538 per month, almost twice the price of the rest of the UK and 9.5% higher than a year ago.

Excluding Greater London, the average UK rent falls to £761 a month, according to the Homelet Rental Index, published today.

Average rental values increased in every region of the UK except the North-West over the year.

The South-West of England and Scotland saw rents increase faster than anywhere else in the UK.

Three UK regions saw rents rise faster than in London over the last three months.

In the South-West of England, rent prices on new tenancy agreements rose 11.4%, while rents rose 11.2% in Scotland and 10.3% in the South-East.

Martin Totty, chief executive officer of HomeLet's parent company Barbon Insurance Group, said: “The index demonstrates just how broad-based the rise in rent prices has now become – this is a UK wide trend.

“Regions which have long been associated with a buoyant rentals sector, such as London, continue to experience rising prices, but rents are also rising in many other parts of the country at similar rates.

“The South-West, for example, is benefitting from its popularity with those attracted to the area for lifestyle reasons, as well as the strong local economy in many of the towns and cities of the region.”

Totty said price trends in the rental market and house purchase market have been very similar in recent years but this is now changing.

“House price growth has slowed whilst rental values have continued to increase, perhaps reflecting a change in the relative attractiveness of renting versus buying over this recent period.

“With early signs of the cost of mortgage finance starting to edge up, it will be interesting to see if this recent trend continues or if the change in buy-to-let mortgage interest tax relief announced in the summer Budget has any indirect impact on rental values.”

He said it could further stimulate rental values if supply of rental properties is constrained as a consequence.”