Rising rents to boost property investment?

This article first appeared on the Total Landlord Insurance website.

Demand for landlord buildings insurance could increase as a growing number of investors are attracted to the buy-to-let market.

According to LSL Property Services, rents across the UK continued to rise in September, making buy-to-let investments more profitable than ever.

The average rent in England and Wales rose by 0.7 per cent to £718 per month during September, surpassing the previous record high of £713 set in August.

As a result, the average rent was £29 per month higher than in September 2010, while the average yield went from 5.2 per cent to 5.3 per cent.

LSL predicts the news is likely to tempt more people to buy rental properties in order to benefit from the excellent returns.

“Rising rents may prove to be a headache for tenants, but they are improving the outlook for investors – which may in turn encourage further investment in the private rented sector,” said David Newnes, estate agency managing director of LSL Property Services.

“Despite capital losses after house prices fell annually, growing rental incomes means returns are still in the black. Yields have risen to their highest level since the housing downturn, outstripping many alternative investments. With house prices yet to resume their upwards climb, there are opportunities for prospective investors to secure profitable bargains.”

Those who do invest in new properties will want to make sure such a valuable source of income is protected and taking out landlord housing insurance is one way to do this.

Meanwhile, tenant arrears improved significantly during September despite rising rents, dropping to their lowest level since April 2010.

Just 8.6 per cent of all UK rent was unpaid or late by the end of the month, a marked fall from the 10.7 per cent of rent that went unpaid at the end of August.