UK Rental Yields on the Up

A monthly study by FindaProperty.com show that rental income has increased for 2 consecutive months. The report further indicates that the average asking rental is the highest since March 2009 at £825pcm. This maybe merely due to a surge in rent during the summer months and students returning from their summer breaks or is this as a result of the recession? What does this mean for the landlord and investor in a market where mortgages are hard to get for the average wannabe homeowner?
We have seen many articles expecting a surge in rental demand as a result of the recession, surely if you have a deposit (of up to 30%!!) then now is the time to start your new venture into the buy-to-let and become a landlord in the UK! House prices are rock bottom, interest rates are at their lowest in history and rental income is on the up! But I need to warn the novice investor, you need to look at the hard facts before departing on this new venture in a foreign country! Although recent statistics show that rental return is on the up and is the highest since March, you still need to look at the history and check what is unique to this supposedly good rental market.
The facts are: Rental return is on the up, but still lower than last year. What does this mean?
At the start of the recession when house prices were still at a relative high rental yields were also at a high! Most of us will expect the theory of demand and supply to be applied. People owned their own homes and there were a lesser demand for rent, now that people were forced to sell at rock bottom prices, and are out of work they can only afford to rent. Out of work being the key words and this equal RENT ARREARS! Can you afford that with your hard earned Rands from your local portfolio?
We have seen a lot of Landlords in the UK putting their properties on the market, this only following a small increase in the demand for properties again. Surely you will say fewer landlords, fewer supply of buy to let so increase in rent! This may be supported by the increase in asking Rent, but what the reports don’t tell us are:
Occupancy levels, void periods, rent arrears, who are the tenants, your repair cost (not to mention finding a reliable maintenance company) and how this will increase in asking price and hopefully increase in actual rental income affect the inflation? We have seen the Footsie had its biggest increase in 50 years, how will this affect the interest rates for next year? Will they increase the rates again to curb inflation? How much does your rental income need to increase to cover you against the risks of void periods with more jobs cuts expected in 2009/10 and an increase in interest rates, at what cost will you get that 2-5 year fixed rate?
With your average yields in the UK now at 4.55% (2008 – 4.66% - source FindaProperty.com) houses have seen the most stable returns at 4.33%, although flats showed higher yields (avg 0.9% more), you need to look at what can you do to add to these yields. While you are restricted to increase the value of your flat with some DIY decorating or will you rather build an extension to the back of your house and increase your rental income and equity in your property!!
You make the maths.
How will you overcome your short term risks while you wait for your equity to realise? Ask professional help! Here at London Property Trader we take all of these risks and opportunities into consideration when sourcing your property in the UK and then we provide you with a rental guarantees, fixed monthly maintenance fees and arrange a competitive mortgage rate to give you a head start on the rest. With our own maintenance teams and large tenancy client base you will never have an empty house and your repairs will be done in no time. With our years of experience we anticipate the life expectancy of most common repairs and take prevention action rather than wait for the tenant to call.