Buy-to-let leads other asset classes

Record-low mortgage lending rates, unshakeable demand from tenants and increasing rental yields have lead many people to turn to buy-to-let investment as a viable means of supplementing their regular income.

Poor returns from banks and building societies have also contributed to a rise in buy-to-let activity.

Performance

Buy-to-let investment continues to outperform all major asset classes. With the population of Britain set to drive demand, rental prices look set to soar even further.

The most recent PPRMI buy-to-let index for Property Partner indicates that residential property continues to thrive as an asset class. Returns on buy-to-let property are continuing to outstrip those generated by shares, bonds and cash investment.

Data from the Index shows total returns from buy-to-let property in England and Wales increased by an average of 9.6% over the last year. This was driven by gains in London, where buy-to-let landlords saw typical yields total 16.5%.

Increases

‘Total returns for residential property crept up to 9.6% in the year to March, as investors rushed to beat April’s stamp duty deadline. This was especially true of London, where annual returns were in double digits, reaching an eye-watering 16.5%. The East was strong too and from firsthand experience the Northern Powerhouse regeneration plan is boosting investment activity in the North West and in particular Manchester.’[1]

Despite the fragile nature of monthly figures, the report indicates clear regional disparities in the housing market. Yorkshire and the Humber and the North East regions in particular are looking extremely fragile.

‘Investors are understandably showing caution ahead of the EU referendum. But the fundamentals-high employment, wage growth, cheap borrowing and the chronic shortage of supply-remain in place and are positive,’ Mr Weaver continued.[1]

Substantial returns

Alternative research conducted late last year by economists at the Wriglesworth Consultancy for lender Landbay indicated that buy-to-let landlords have gained returns of around 1,400% since 1996.

This figure is significantly greater than other mainstream investments, such as shares, bonds and monetary transactions. With existing poor supply of housing failing to quell demand, present signs indicate that this growth will continue.

Additional data from HomeLet shows that typical rents in the UK outside of London stand at £764 per month, a rise of 5.1% year-on-year. The investigation found that rents rose in 11 out of the 12 regions of Britain annually in the three months to April 2016. The North West of England was the only region to see a fall, albeit of just 1%.

Martin Totty, chief executive of Barbon Insurance Group, Homelet’s parent company, noted, ‘rental price growth in most areas of the country is unchanged from the trends observed over almost three years.’[1]

[1] https://www.landlordtoday.co.uk/breaking-news/2016/5/buy-to-let-returns-top-all-other-asset-classes