It is also becoming clear that landlords who beat the tax deadline and who have a small mortgage exposure are in a completely different position to someone now contemplating entering the buy-to-let market for the first time. It seems as though the new measures have had the intended or unintended consequence of squeezing the supply of new rental accommodation. That's good news for existing landlords and bad news for aspiring renters.
However, to a large extent, the market is self governing because there's not much point in pushing rents up to a point where no-one can afford them. But despite rents rising on average by 2.4 per cent across England and Wales (regional variations are significant, with rents in the East Midlands, for example, up by 8.5 per cent in the last year) the affordability factor does not appear to have deteriorated, especially with high levels of employment and some wage growth. It may not seem to be easier to pay what remains a significant percentage of your wage as rent, but rental arrears in April fell to 8.1 per cent of all rent due compared with 9.1 per cent in March. But the trend is not clear because this time last year arrears were just 7 per cent, and this is well down from the 14.6 per cent peak in February 2010. Perhaps it's true to say that although rents are higher, growth in disposable income means that they are still affordable.
According to research by Your Move and Reeds Rains, the average monthly rent in England and Wales rose by 0.3 per cent in April to £793. Taking into account rental income and capital growth, but excluding costs such as maintenance and mortgages, the average return for a landlord was 10.7 per cent, down from 11.4 per cent in the year to March, but up from 9.8 per cent a year earlier. However, despite the rise in rents helping to offset the yield compression as a result of higher capital values, gross yields fell from 5.1 per cent a year earlier to 4.9 per cent. This is not so much a problem for existing landlords who have already made a book profit on the capital appreciation, but still acts as another factor to be taken into account by prospective landlords.
For the aspiring tenant who is struggling to catch even the bottom rung of the rented apartment sector, there is always the alternative of renting a room, where the average monthly rent is £575. However, there has been a lot of interest in this sector of the market, and average rents in the last year have jumped by 27 per cent. And while the number of flatmates looking for a room dropped to 3.6 for every room available in the first quarter from six a year earlier, much of this reflects the fact that more people are looking to rent out a room. There are regional variations, however. In Liverpool the ratio of rooms to renters was just 2.5, while in Glasgow this jumped to 9.4.
Room availability has probably been given a boost by the government's little known rent-a-room scheme, where the amount that a landlord can earn each year before paying tax was increased from £4,250 to £7,500. Rooms or whole floors can be let, but not in houses converted into separate flats, and there are a host of other conditions. But as a means of getting away from the family home, it has an appeal both for aspiring landlords and tenants. Interestingly, it's not just restless sons and daughters who have become flatmates. According to flat share and house share website EasyRoommate, while still relatively limited, one of the fastest-growing areas is the number of retirees renting a room.
