As cost-of-living pressures continue to build, a growing number of tenants are looking to balance the combined impact of rising rents and escalating running costs. Meaning the appeal of flats and energy-efficient houses is set to rise further in 2023.
THE VALUE OF TOWNS AND CITIES WITH JUST ONE UNIVERSITY
The student population and landlords who have built portfolios to incorporate a large element of student lets and houses in multiple occupation (HMOs) in and around university towns and cities across the UK have not had it easy over the past few years. Thankfully, schools and universities are now largely back to ‘normal’ and just about to start, or have started, the new academic year.
To coincide with this, Paragon Bank has revealed the locations where landlords letting to students can achieve the strongest yields. Analysing mortgage applications for properties located in popular student postcodes, the lender found that landlords providing student accommodation in towns or cities with just one university typically achieve the highest yields.
THE RISE OF THE PORTFOLIO INVESTMENT
It’s fair to say that professional portfolio landlords are dominating the current BTL market as the number of ‘amateur’ landlords has slowly dwindled on the back of tax and legislative changes.
Landlords build portfolios in a variety of different ways over contrasting periods of time. Many professional landlords may have started their journey as more accidental ones but came to appreciate the potential of the BTL sector. Others may have entered this arena with a more structured and scalable plan and then there are some who have the ability to acquire whole portfolios in one fell swoop.
HOW BTL COMPARES TO OTHER INVESTABLE ASSETS OVER THE PAST 12 MONTHS
As an investment vehicle, BTL properties have long been held in the highest of regard. However, in recent years, regulatory and tax changes have served to challenge profit margins and investment potential with all landlords having to evaluate individual properties within their portfolio and adapt/diversify if necessary.
With this in mind, it was interesting to come across new research which looked at the returns seen across 12 investable assets in the last year to reveal where money has been best placed in the current climate.
It has obviously been a bumper year for the UK property market, with house prices rising across the board. The average UK homeowner is suggested to have experienced a gain in capital to the tune of 9.3% in the last year alone. So how does this compare to other investable assets?
LIMITED COMPANY BORROWING HITS THREE-YEAR HIGH
The BTL sector sits under a constant regulatory microscope, as evident by the array of tax and legislative change seen over the past five years or so. These changes continue to shape how many landlords are structuring their portfolios and have resulted in far more activity at the more ‘professional’ end of the landlord spectrum than at the ‘amateur’ end.
Arguably the largest impact from this has been the growth in limited company BTL lending. And this is showing no sign of slowing anytime soon, quite the opposite in fact. So much so that the proportion of landlords who plan to purchase their next buy-to-let property through a limited company has hit the highest level for three years.
THE CONTINUED RISE OF THE PRS
The summer of 2022 could well be a pivotal one for the housing market and the private rented sector as rising living costs continue to impact a range of personal financial scenarios, affordability, savings pots and homeownership aspirations.
With house prices experiencing sustained highs, the pressure on potential first-time buyers is mounting and big decisions need to be made over whether homeownership might be an option or if a longer-term rental arrangement may be more preferable from a lifestyle and flexibility perspective.
PROPERTY MAINTENANCE, OUTGOINGS AND THE IMPORTANCE OF THE ADVICE PROCESS
As the rise in the cost of living is testing all our financial capabilities, this is certainly no different for landlords who have many different forms of outgoings and costs to calculate relating to their property investments. Maintenance has long been one of the major considerations for landlords from a time and cost standpoint and with the price of labour and materials rising, even greater scrutiny is being placed on even the smallest of jobs.
A CAPITAL RENTAL RESURGENCE?
There are always a number of considerations for landlords, new and old, to take into account when starting, adding to or diversifying their portfolios, especially when it comes to location. The capital has long been a hotbed of BTL activity due to the strong potential yields on offer and the ease in which to let properties. However, with the pandemic impacting the attraction of city living for a variety of reasons, the high-profile London rental market has inevitably suffered over the past couple of years. Although, positive signs are now emerging around a resurgence.
ROOM RENTS AND THE VALUE OF HMO ADVICE
When looking at rents and yield, we often focus on the entire property but with a growing student population and more young professionals heading back to their offices and an urban life, a sizeable proportion of these are living as sharers in an HMO.
THE CURRENT STATE OF THE BUY TO LET MARKET
When evaluating the current BTL market and the additional pressure being placed on people’s outgoings as the cost of living crisis sweeps the UK, there is only one place to start, rent. According to the latest market analysis from HomeLet, the average rent in the UK reached another record high of £1,078 in March, up 0.8% on the previous month. The data showed that when London is excluded, average UK rents stood at £910 – a rise of 0.9% against last month– with all regions across the UK witnessing an uplift in annual variance.
Average rents in the capital are reported to have risen again to an average of £1,770 pcm – an increase of 0.7% on last month’s figures. However, the largest monthly variance was seen in the South West which was up 1.8% to an average of £1,017 pcm. Scotland saw the largest annual variance at 12.9%, pushing the average rent in Scotland up to £770.
