Spring is definitely in the air for the buy to let market in the UK with some new found optimism after a long period of backlash against Government tax and regulatory changes.
It seems as if many landlords are embracing a business like attitude and getting on with making their portfolios work for them. Indeed, London, Manchester and Liverpool are the most popular cities for buy to let investment in the UK going into 2019, according to new research.
And most landlords are planning to increase their portfolio, the survey commissioned by Experience Invest has found while Nottingham, Leeds, Birmingham and Newcastle are also regarded as good bets for buy to let going forward.
When looking at the types of property that investors were considering investing in this year, the survey also found that houses were top at 67%, followed by flats at 54%, new build residential for 39% and 24% student accommodation.
Overall, just 11% of those surveyed said that they plan to reduce their portfolios in 2019. Some 39% are planning on increasing the size of their portfolio over the coming 12 months, while 35% have no intention of buying or selling any property in 2019 and 15% will be selling some assets to then reinvest in new properties.
It comes at a time when rents are steady. Official figures from the Office for National Statistics (ONS) show that in the private rented sector rents increased by 1.1% in the 12 months to February 2019, up from 1% in January.
In England and Wales rents were up 1.1%, while in Scotland they increased by 0.7% and in London by 0.2%. But, overall, rental growth has generally slowed since the beginning of 2016, driven mainly by a slowdown in London over the same period.
Pressure will continue on landlords to raise rents in 2019, according to Kate Davies, executive director of the Intermediary Mortgage Lenders Association (IMLA). She believes that after filing their 2017/2018 tax returns at the end of January, landlords will be more aware that ongoing changes to mortgage interest tax relief are increasing the financial challenges ahead.
It may mean becoming more business-like or adopting new models. The industry is aware that this could mean offering longer tenancies or even shorter tenancies. In this respect a new study has found that short term rents could be worth considering.
The research from short term letting agency Portico Host found that short term let properties in Walton, Liverpool, are achieving the best yields in the North West at 30.68%, compared to landlords of longer term rentals, who can achieve a yield of 7.88%. The Airbnb yield figure is based on an occupancy rate of 60% of the year, which is typical for these types of properties due to seasonal demand.
While this is not the answer for every landlord it is a model that they might want to look at as they seek to improve and grow their business. They should also be buoyed by research showing that buy to let is still a good investment option beating investing in gold, cash and fine art in the last decade in terms of returns.
Investing in the FTSE 100 would have brought the biggest return when considering the annual capital gain and the percentage yield with an increase of 119%, whilst the value of classic cars is up 94% during the same time period.
However, for those that aren’t professional investors a buy to let property is a very good option, according to the research from lettings inventory and property compliance specialists VeriSmart.
The report says that when considering the annual gain in house prices along with the increase in rental yields, an investment in the sector a decade ago would have brought a 92% return today. This is much higher than the 60% return that investing in gold would have brought and a world away from the 16% increase in cash or the 4% drop in fine art.
It also says that the growth in the property market has been by far the most reliable option with the FTSE 100, gold or cash providing a far more volatile option that is also open to a larger degree of impact from political and economic factors as well as influence from other foreign countries.