Posts with tag: rental yields

Investors Receiving Highest Returns in Manchester

Published On: June 1, 2015 at 5:08 pm

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HSBC Mortgages has found that the top three areas for receiving the highest rental returns are in the North West. So far this year, Manchester has offered the largest yield, at 7.93%.

Investors Receiving Highest Returns in Manchester

Investors Receiving Highest Returns in Manchester

Manchester made it to the top of the buy-to-let hotspots in the country, up from second place in 2014. Rental returns in London are some of the lowest.

Buy-to-let investors have been heading to the North of England as prices are typically lower and consequently produce higher yields. HSBC found Manchester, Kingston upon Hull and Blackpool to have the best returns.

The bank also revealed that Manchester has experienced a slight rise in average property prices, up from £104,244 in 2014 to £108,870 in 2015. However, economic progress in the city has upheld strong demand for rental accommodation.

Annual rents in Manchester have increased by 4% in the past year, from £8,316 to £8,628. Furthermore, the North West as a whole, especially Manchester, has one of the largest student populations in Europe.

HSBC found that over a quarter (27%) of housing stock is privately rented in the city, giving it the highest proportion of rental homes in the UK.

Kingston upon Hull and Blackpool have climbed the list due to their low house prices and strengthening demand for rental accommodation.

The average house price in Kingston upon Hull is £69,135 and Blackpool’s is slightly higher at £79,654. However, both areas require the lowest initial buy-to-let investment of all locations studied. The research included 50 UK towns and cities with the most private rental housing stock.

Top 20 areas for buy-to-let returns

Position Location 2014 position % of privately rented housing Average house price Average monthly rent Average annual rent Rental yield

Year-on-year yield growth
1 Manchester 2 27% £108,870 £719 £8,628 7.93% -0.7%
2 Kingston upon Hull 5 19% £69,135 £450 £5,400 7.81% 4.5%
3 Blackpool 4 24% £79,654 £488 £5,856 7.35% -3.6%
4 Forest Heath 22 22% £171,322 £1,035 £12,432 7.26% 38.7%
5 Coventry 6 19% £115,945 £702 £8,424 7.2% 1.5%
6 Southampton 1 23% £151,415 £900 £10,900 7.13% -18.3%
7 Nottingham 3 22% £89,312 £524 £6,288 7.04% -8.3%
8 Liverpool 9 22% £90,426 £494 £5,928 6.56% 0.8%
9 Cardiff 16 20% £150,892 £802 £9,624 6.38% 6.8%
10 Portsmouth 8 22% £155,696 £825 £9,900 6.36% -2.2%
11 Slough 11 23% £198,972 £1,050 £12,600 6.33% -1.8%
12 Cambridge 10 24% £205,019 £1,083 £12,995 6.31% -2.5%
13 Bournemouth 12 28% £183,600 £950 £11,400 6.21% -0.3%
14 Oxford 7 25% £277,201 £1,432 £17,184 6.2% -11.7%
15 Luton 15 21% £144,721 £725 £8,700 6.01% 0.4%
16 Leicester 17 21% £115,860 £550 £6,600 5.7% -3%
17 Brighton & Hove 13 28% £265,858 £1,248 £14,976 5.63% -8.8%
18 Southend-on-Sea 23 21% £172,024 £776 £9,312 5.41% 4.4%
19 Norwich 25 20% £158,102 £700 £8,400 5.31% 5.4%
20 Newham 14 33% £292,306 £1,255 £15,192 5.2% -13.4%

Head of Mortgages at HSBC, Tracie Pearce, comments on the significance of location, property prices and rental demand when investing in the buy-to-let sector: “Our research shows buy-to-let remains an attractive option for investors, but it’s important they focus on locations where rents have outpaced house prices. This means not just looking at large towns and cities, but also commuter areas and those with high rental demand and concentrated employment, such as a hospital or university nearby.

“Almost a third of areas in our report have seen a year-on-year growth in yield and almost half of the areas have achieved yields above 5%.

“Buy-to-let is a big investment and shouldn’t be taken lightly, but with the right research, landlords can feel confident that they can achieve good returns around the UK.”1

The top buy-to-let hotspot in London is Newham, with an annual rental yield of 5.2%.

However, the capital has experienced continuous decline in rental returns as property prices have increased without corresponding rents. Newham, Brent and Lewisham have seen a decrease in yield growth of over 10%.

Six of the ten worst places for buy-to-let returns are in London, with yields as low as 2.87% in Kensington and Chelsea, where the average house price is now over £1m and rents have been stagnant.

1 http://www.landlordzone.co.uk/news/manchester-buy-to-let-gives-highest-blt-yields#

Fastest Annual Rent Increase Since 2010

Published On: May 22, 2015 at 3:18 pm

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Latest Landbay Rental Index Reveals Best and Worst Areas for Growth in England

Rents in England and Wales rose 4.6% in the year to April 2015, found the latest Buy-to-Let Index from Your Move and Reeds Rains. This is the fastest annual increase since November 2010.

In absolute terms, rents are now at a record high. The average rent in England and Wales in April was £774; the most expensive ever witnessed.

In monthly terms, rents increased by 0.8% between March and April, the fastest month-on-months growth since September 2014.

Director of estate agents Your Move and Reeds Rains, Adrian Gill, says: “Rents are going skywards and still accelerating. That momentum is fuelled by a fundamental shortage of housing and given oxygen by renewed wage growth.

“Economic progress has brought about a slow but steady stream of household earnings and employment; the most basic requirements for rent rises. Placed in the context of the UK’s pressure-cooker housing shortage, these modest improvements have driven rents up at record speed.

“This should be a loud and clear signal to the authorities that home building is more than just manifesto-fodder. People have more money in their pockets, but we’re in danger of seeing that recovery squandered away on a housing shortage.

“With the surprise of a relatively strong majority Government, there has never been a better time to take the bull by the horns and fix this housing crisis at the root. When you hear a kettle whistle, you take it off the hob.”

Regionally, the East of England experienced the highest rent rises on an annual basis. Since April 2014, rents increased by 12.5%, up from 12% annual growth in March 2015 and 10.2% in the year to February 2015.

Second was London, with 7.8% annual growth. This compares to 5% in the 12 months to March and 4.9% in February.

Yorkshire and the Humber was third with a 2.2% annual rise.

Contrastingly, rents in Wales are 2.8% lower than in April 2014. Rents in the North East have dropped by 0.8% and the East Midlands has seen rents fall by 0.2%.

In monthly terms, London has seen the strongest growth, of 2.3% from March to April this year. The South West was second with rents rising 1.1% in the past month and the West Midlands followed with a 1% increase.

Wales also experienced the highest monthly decline, of 1.8% from March to April. In both the North West and North East, rents dropped by 1.4%.

Fastest Annual Rent Increase Since 2010

Fastest Annual Rent Increase Since 2010

Gill continues: “The East of England has witnessed rapid growth in property purchase prices and rental prices have taken a similar course, albeit even faster. Away from the East, London is the real figurehead for the housing dilemma. Leading the way for both the positive story of wage growth and the essential challenge of overcrowding makes the capital a potent emblem for the wider issues facing the nation.

“Rent rises tend to follow wage growth, so it’s no surprise to see this clustered around the South. However, this could change if demand for jobs and homes in northern England starts to catch up with supply in a similar way.

“For example, if George Osborne’s commitment to the northern powerhouse stimulates more investment in infrastructure and more jobs, that will boost the success of places like Manchester. But the housing supply crunch could spread to northern cities if space isn’t found for homes too.”

Rental returns

The gross rental return on the average rental property in England and Wales was 5.1% in April 2015, a steady figure from the 5.1% yields of March 2015 and April 2014.

However, total returns have dropped due to slower house price rises. Considering property price changes and void periods, total annual returns on a typical rental home was 8.9% over the year to April, before costs such as mortgage repayments or maintenance. This was 10.2% in the 12 months to March and 11.5% in April 2014.

In absolute terms, the average landlord in England and Wales has received a return – before deductions such as mortgage repayments – of £15,503 in the last year. Rental income accounts for £8,247 and capital gains makes up £7,256.

Predictions for the future are unreliable at present, but if current trends continue, the next 12 months to April 2016 could see an average return of 3.4% or £6,256. Rental income would make £9,292, but capital growth would be negative, causing a decrease of £3,036. This is based on prices in the last three months.

Gill comments: “Price dips in recent months are unlikely to continue for a long time, which makes predictions for the next year more difficult than usual. However, rising prices should always be seen as a bonus for landlords rather than something to be relied on, and recent cooler price growth underlines that need for caution.

“However, rapid rent rises will matter most to landlords and in time will put upwards pressure on yields. Rents have now risen faster than prices over the course of 12 months and that improving prospect of a steady rental income will be the positive deciding factor for those considering new property investments.

“Most encouraging for landlords will be the seeming affordability of the latest rent rises, with arrears falling as a whole. Within that, there is still an overstretched core of tenants who struggle every single month and a persistent chance of these most hard-pressed households falling more seriously behind on rent.

“This left-behind minority needs to be tackled somehow and dealt with sensitively by landlords in the meantime. But the overall trend is clear and indicates that one factor behind faster rent rises is improving household incomes.”

The latest Tenant Arrears Tracker from Your Move and Reeds Rains found a 4% rise in serious rent arrears cases. Read more here: /cases-of-serious-rent-arrears-up-4/.

Gill concludes: “On average, the nation’s finances are improving as more and more people manage to make their way into rewarding employment and this appears true for the one in five UK households who now live in privately rented homes.

“But at the same time, a smaller minority are still struggling to get their living costs under control, even in the face of the wider recovery. That persistent monthly scramble is reflected in those most seriously behind on rent payments, who still face losing their homes in their thousands.

“This number has improved too over the longer term, but it should act as a warning shot against complacency and a call to action in the struggle to support more new homes across all tenures.”

1 http://www.propertyreporter.co.uk/landlords/yields-hold-strong-for-landlords-as-rents-rise-fastest-since-2010.html

North East Property Prices Rise 11.1% in a Year

Published On: May 8, 2015 at 4:21 pm

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Property prices in the North East have increased by 11.1% in the past year, but monthly growth is steadying.

The KIS Housing NOW (North of Watford) report analyses the North East housing market. Research from the KIS Intelligence Service found that the average house price in this region was £137,411 in April 2014. It is currently £154,450, but this is £49 less than the previous month, a decline of 0.04%.

The part of the region experiencing the highest annual rise is South Shields, where prices are now £10,598 more than 12 months ago.

North Shields has also witnessed soaring price rises, of £10,179 over the same period.

North East property hotspots

Area

Price rise between April 2014-April 20151
South Shields £10,598
North Shields £10,179
Morpeth £9,988
Tynemouth £9,745
Newcastle £7,927

Houses in Seaham have experienced £6,775 decreases to their value in the past year, and property prices in Blyth have increased by just £2.

However, prices in Blyth have risen fastest over the last four weeks, up 3%, followed by South Shields at 2.4%. Prices in South Shields have increased by 4.6% in the first quarter (Q1) of this year.

In Peterlee, prices dropped at above average rates of -1.8%, followed by Sunderland at -1.7% and North Shields at -1.4%.

Darlington was named April’s Best to Buy due to prices dropping 1.3%. Houses in the town are now 3% cheaper than at the beginning of 2015.

84.3% of homes in Darlington are privately owned, compared to the average of 76.8% in the North East. 38% of these houses are semi-detached and 31% terraced.

North East Property Prices Rise 11.1% in a Year

North East Property Prices Rise 11.1% in a Year

Couples without children occupy 36% of properties, with the average home housing 2.2 people. 17% of homes are privately rented and another 11% are rented from the local authority or social landlords.

32.8% of residents are aged 24-49-years-old, with more people aged 47 than any other age. 23 citizens are over 100-years-old.

Rental market

The average North East rental property costs £548 per month to let, which is £7.50 less a week than this time last month.

Rents are £12 less than this time last year, a 2.2% drop from £560 per month in April 2014.

Gateshead provides the best returns for landlords, with rental yields of 6.6%. However, this has dropped monthly by 0.1%. Other strong areas are Peterlee at 5.2%, Killingworth at 5.1% and Sunderland at 5%.

Average yields dropped to 4.3% despite rises in Blyth of 0.6% and Killingworth at 0.4%. Washington experienced a huge fall of 1.2%.

Killingworth was named April’s Best to Invest. Landlords can achieve almost identical yields to Newcastle, where properties are £36,965 more expensive.

41% of homes here at semi-detached, with 21% of properties occupied by couples with children, 18% without children and 14% by just one person.

KIS Group Founder and CEO Ajay Jagota comments on the findings: “It’s striking how much the North East property market has turned around in the past 12 months, even if growth is non-existent right now. Again we’re seeing the value of highly localised analysis like ours; South Shields homes are worth £11,000 more than this time last year, Blyth homes are worth £2 more.

“Across the region, prices have spent another four weeks vegetating, down this month by less than half of 0.1%. There’s next to no change from month-to-month at the moment, and it seems like the prices we have at the moment are the new normal, for the time being at least.

“That doesn’t mean that prices aren’t changing from area to area; in Blyth, they’re up 3% month-on-month, even if, as we’ve seen, they’ve got some ground to make up and in South Shields they’re up nearly 5% over the first quarter of 2015.”

Jagota continues: “Although yields for investors remain very competitive, rents appear to be falling in the region. Not only are they down £30 this month, they’re down 2.2% year-on-year. Areas like Newcastle and Gateshead have actually seen rents fall by over 1% this year alone.

“I have always had misgivings that rent caps are the right solution for renters, with a lot of the evidence suggesting they actually force rents up.

“Even if that proves not to be the case, these figures show that in the North East rent caps are completely unnecessary as over the course of the year they’ve actually gone down.

“When it comes to where landlords are going to get the best return on their investment in the region, Gateshead is still well ahead of the pack, even though it’s rental yield is a little below the 7% you can usually expect to make at the moment, around 6.6%. Look out for Peterlee though, where an average house costs well below £100,000 and which currently gives you a return of 5.2%.”1

1 http://www.landlordexpert.co.uk/2015/05/07/north-east-house-prices-have-risen-by-11-1-in-the-last-year-but-are-all-but-unchanged-this-month/

 

 

 

 

Buy-to-let market remains attractive

Published On: April 27, 2015 at 9:58 am

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New research has indicated that Buy-to-Let is still a highly attractive proposition for would-be landlords. Low savings rates and the volatility of the stock market remain two of the main reasons why investors are flocking into the buy-to-let environment, as is a great opportunity for them to become less reliant on their day-to-day employment.

Incomes

A study, conducted by PropertyLetByUs.com indicated that 40% of buy-to-let gain a substantial income from their property portfolio, with half saying that this is their main source of income. The study also revealed that just over a third of buy-to-let landlords have full-time jobs, with 5% stating that they worked part-time.[1]

Of those questioned, 50% of landlords said that they had a LTV of 20%, while 36% of landlords said that their LTV was 40%. One in five landlords said that they had rental yields of between 15-30% per year, while one in four said that their yields were between 5-10%.[2]

Managing Director of Property Let By Us Jane Morris, remains certain that the buy-to-let market is going from strength to strength. Morris said, ‘buy-to-let continues to provide an excellent return on investment, with many landlords able to take an income, as well as enjoying the capital growth of the property.’[3]

Buy-to-let market remains attractive

Buy-to-let market remains attractive

Rise

Research from the HomeLet Rental Index has shown that rents across the United Kingdom are 10.2% higher than this time last year. The average rent for a tenancy agreement in the UK so far is £902. This is in comparison to £819 during the same period twelve months ago. Similarly, rents are up in every region of the UK from 12 months ago, with the exception of Wales.[4]

 

With this said, mortgage rates are still at record lows levels, which in turn is assisting buy-to-let landlords to achieve more substantial returns.

 

[1-4] http://www.propertyreporter.co.uk/landlords/nearly-50-of-landlords-rely-on-btl-as-their-main-source-of-income.html

 

 

Buy to Rent Returns Rising Across UK

Published On: December 17, 2014 at 3:47 pm

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New research has revealed that buy-to-let property rental yields are rising across three quarters of the UK.

Buy-to-let investors now receive average monthly rents of £874, however, the high point in the market, when students crowd the market, is over. The strength in the industry could therefore be a result of many tenants choosing to stay in private rental accommodation.

Buy to Rent Returns Rising Across UK

Buy to Rent Returns Rising Across UK

Those with assets in the buy-to-let sector are probably seeing higher returns than a year ago.

The HomeLet Rental Index revealed that nine of the 12 UK regions saw annual rental price increases in November.

HomeLet revealed that the average landlord earns £874 in gross rent per month from each asset. Properties in Scotland are performing the best in the UK, as rents rose 11.7% over 2014.1

Traditionally, at this time of year, prices seem to drop slightly after the high figures seen in September and October, due to a large amount of student tenants moving into the market. However, HomeLet say that their latest research proves the industry has an underlying strength.

Chief Executive Officer of the Barbon Insurance Group, of which HomeLet belongs, Martin Totty, says: “The outlook for the private rented sector remains positive for several reasons: the pace of house building is unlikely to have a significant effect on the supply of property to buy or to rent in the short term; high house prices; and a mortgage market where lending criteria remains constrained, are combining to ensure that the demand from tenants needing rented accommodation remains strong.”1

Additional research from Knight Frank, and Savills shows that many people are choosing to live in rental accommodation, despite the ability to buy their own home, naming the flexibility of renting as the foremost reason.

1 http://www.selectproperty.com/2014/12/buy-let-property-returns-rising-across-much-uk/