Rental Rates in the UK rise at their fastest for two years
Latest figures show that rental rates on residential property in the UK are increasing at their quickest in more than two years, resulting in average yields for property investors rising to 4.5%, the highest average since 2017.
The Buy to Let Britain report produced by Kent Reliance states that landlords expect a continued uplift as the private rented sector grew in size by £6 billion over the last 12 months. With very little growth in the number of rental properties (0.2% per year) due to changing legislation for landlords and the uncertainty of Brexit, this demonstrates the effect of the increase in rental rates.
Prices of Buy to Let properties have seen a mild increase of 0.3% in the past year throughout the UK, despite headline figures suggesting property prices as a whole fell in some regions. The increasing rental rates in comparison to buy to let property values can be in part put down to landlords looking to maintain profit margins in the face of rising costs. A quarter of landlords expect to increase their rents in over the next half year, while around one in 20 landlords foresees reducing them.
Affluence and affordability from tenants contributes to the ability of landlords to do so as wages continue to rise ahead of inflation; currently by 3.4% and rising by 2.9% last year.
The report also states that landlords are overcoming the increasing costs caused by legislation change by owning their properties through limited companies, with the data showing a 60% increase in mortgage applications through limited companies in 2019 compared to 2016. Investors are also taking advantage of attractive mortgage rates to fix costs.
Despite difficult conditions for property investors over the last few years, the market offers encouragement and positivity for those looking to expand as rents and yields rising faster than house prices provides great opportunities for investors.