Landlords welcome buy-to-let improvements

As the buy-to-let market experiences its most positive month in recent memory, landlords have embraced rising rents, improving house prices and falling arrears, signifying the "beginnings of a seasonal surge" in the letting market.

According to the latest figures, the average rent in the UK rose 0.1% in March to £659 per month, the second consecutive monthly increase, and a 1.5% improvement on last year.

While rents remain 4.0%, or £29 per month, lower than their peak level in August 2008, yields on buy-to-let property dropped slightly to 4.7% from 4.8% in February as house prices continued to rise, outpacing increases in rents.

Tenant arrears have also fallen to their lowest level since 2008, as £227m worth of unpaid rent was owed in March, 10% in total, down from 11.2% at the start of 2010.

"We're not just seeing an improving picture for landlords - but tenants too," commented David Brown, spokesman from LSL Property Services which compiled the data. "The performance of arrears was a surprise story of the recession, and they have exceeded expectations again in the first quarter of 2010."

"Fewer tenants are losing their jobs, or seeing pay-cuts and falling behind with their rent. The improved situation with tenant arrears has meant that, although house prices have risen, effective yields landlords receive on property investment have actually snicked-up in the past month in real terms."

Despite the government choosing to double the stamp duty threshold for first time buyers, the reality is that many still can not afford purchase deposits due to continuing restrictions on mortgage finance. As a result, demand for rental properties looks unlikely to drop in the coming months.

"The increased tenant demand is continuing to push up rents," added Mr Brown. "We've seen the beginnings of the seasonal spring surge, combined with the continued recovery of the private rental sector."