South East Rentals At Risk Of Over-Heating

South East Rentals At Risk Of Over-Heating

The latest survey from Rightmove identifying property trends has discovered that 60% of tenants in London and the South East expect to be paying more for their rented accommodation in 12 months’ time, a figure that represents 6 out of 10 of every renter.

In an area where the supply of rental properties is failing to keep pace with high demand from tenants this finding is not all that surprising. While ever-increasing rent might seem appealing to landlords with their property portfolios based in the South East, it means that this area of the UK is most at risk of ‘over-heating’ and most in need of further investment from investor-landlords.

A solution would be to attract more buy to-let property owners to the area to help deliver the level of supply required to satisfy the stock-starved rental sector. This is made more difficult however because of the high value of buying property in London and the South East.

Rightmove’s research shows that an average return for a rental property is currently greater in many of the more northern regions than in London and the South East. The average rental yield in the North East is 6.5%, the highest in the UK ahead of North West (6.4%) and Wales (6.2%). In contrast, primarily because of the higher capital values in the south, investors in London are seeing an average rental yield of 5.7%, and in the South East 5.6%.

Lower entry costs further north also mean an investor can buy more property units, spreading the risk rather than perhaps having all their eggs in one basket with a higher value single investment further south.

Will the overheating therefore lead to rise in rental arrears?