Countrywide Monthly Lettings Index – July 2014

Countrywide Residential Lettings

Tuesday, August 26, 2014

Furnished flats in towns and cities provide the best rental returns for landlords

Landlords are able to achieve greater monthly rental returns by knowing what potential tenants are looking for, letting furnished rather than unfurnished properties in key areas, according to Countrywide Residential Lettings, the UK’s largest lettings agency.

Typically towns and cities have a younger tenant population who have little or no furniture and are willing to pay a premium for it to be provided by the landlord. In rural areas typically there are more families who have accumulated their own furniture over time and in many cases are actively seeking unfurnished properties.

Table A: Top ten local authorities where rental properties are offered furnished

Local Authority

Percentage of rental properties offered furnished

Newham

92%

North Tyneside

91%

Birmingham

89%

Westminster

87%

Gateshead

84%

Leeds

83%

Cardiff

83%

Newcastle

82%

Manchester

81%

Hackney

80%

Data from Countrywide Residential Lettings shows that there is an 8.1% premium for a furnished flat, typically equating to £52.40 extra in rent each month and a 2.8% premium for furnished houses, equating to £14.90 extra in rent each month, when compared to an unfurnished property. In some more affluent urban locations a landlord can expect to expect to achieve a third more in rent for offering a property furnished. This is driven by demand and a tenants’ willingness to pay a significant premium for high quality furnished accommodation.

Table B – Top 10 local authorities where the premium for a furnished flat is highest

Top 10 Local Authorities

Average monthly rent for unfurnished property

Average monthly rent for furnished property

Differential in rent between unfurnished and furnished property

Leeds

£525

£715

36%

Salford

£417

£550

32%

Brentwood

£819

£1,036

27%

Canterbury

£618

£782

27%

Liverpool

£519

£651

25%

Nottingham

£500

£625

25%

Birmingham

£605

£756

25%

Lambeth

£1,185

£1,477

24%

Preston

£494

£614

24%

Bradford

£411

£510

24%

There are a number of city centre locations where furnished properties make a big difference to the premium a landlord can achieve. The relocation of the BBC to Salford in Manchester has had an impact on the city’s rental market, with an influx of BBC employees willing to pay a high premium for furnished flats close to the corporation’s offices.

Also in seaside locations, such as Eastbourne, there are typically a higher percentage of elderly people who are willing to pay a premium for furnished properties in move-in condition. However, there are exceptions, particularly in less affluent areas such as Barnsley and Luton, where falling levels of homeownership amongst the young mean extended periods of time spent in the private rented sector.

In general, the locations where furnished property attracts a smaller premium tend to be areas outside regional city centres. These are typically expensive areas of Central London, where the cost of furniture comprises only a small percentage of the rent and in more rural areas where there is a larger population of older families with children who are more likely to have their own furniture.

Variations in average monthly rents and arrears

There continues to be a gentle growth in average monthly rents in England, Scotland and Wales in July 2014, with the average UK rent now standing at £898pcm. The highest average monthly rent remains in Central London at £2,503pcm and the lowest in Scotland at £643pcm.  In terms of property size, there has been a year-on-year increase in average monthly rents apart from three bedroom homes which have seen a 7.2% decrease year-on-year.  One bedroom properties saw the greatest increase in rents, up 4.2% year-on-year and 1.5% month-on-month.  

Rent arrears have fallen year-on-year apart from in the South West, Midlands and the North where arrears have increased slightly. While jobs are being created at a record rate and the claimant count continues to fall, wage growth has lagged behind inflation putting pressure on tenants.

Table C: Regional variations in rents and arrears data in England, Scotland and Wales

Region

July 2014 Average Rent

June 2014 Average Rent

Rent year-on-year increase / decrease

July 2013 Average Rent

Arrears >30 days (% rent roll £)

Greater London

£1,211

£1,192

8.8%

£1,109

7.7%

Central London

£2,503

£2,583

3.7%

£2,396

8.6%

East of England

£892

£886

5.7%

£821

6.3%

South East

£1,142

£1,145

3.3%

£1,063

4.8%

South West

£766

£773

(0.8%)

£746

5.0%

Midlands

£662

£634

0.5%

£641

6.8%

North

£647

£640

1.7%

£617

7.3%

Scotland

£671

£664

5.7%

£604

6.8%

Wales

£643

£664

(2.0%)

£626

6.1%

Total

£898

£893

3.7%

£844

6.4%

Commenting on the findings Nick Dunning, Group Commercial Director, said:

“Whether you are a first-time landlord or a seasoned investor it is important to understand what tenants are looking for. This not only helps to minimise void periods but also assists in achieving the highest return from the rental property. In city centre locations, most tenants now expect to be able to move into a high quality furnished property with minimal hassle and are willing to pay a premium to do so. The higher percentage of younger people living in city centres and the turnover of tenants mean tenants are less likely to have their own furniture and are keen to avoid the expense of moving it.

“Outside of larger towns and cities, the premium attached to furnished properties tends to be smaller with families and older people making up larger proportion of tenants. Turnover in these markets tends to be lower with tenants more likely to have their own furniture already. In such markets it pays for the landlord to be flexible, giving a would-be tenant choice.”

-Ends-

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