This year has been extremely prosperous for landlords as there was a high level of demand for private rental properties across the UK. Cities such as London in particular saw an increasing amount of people starting to rent properties, which means that landlords have been benefiting from impressive yields.
However, it hasn’t always been easy for landlords this year as there were a number of changes to the private rental sector which meant landlords had to spend more time and money on looking after their property portfolios. In fact, according to research from HSBC yields from buy to let properties in London fell to just 2.7 per cent last year due to increasing property prices and subsequent landlord insurance, maintenance and letting agent costs.
Surprisingly, properties in Southampton provided the largest yields at 8.73 per cent, while properties in Manchester provided an average yield of 7.98 per cent. Discussing their findings, Peter Dockar, head of mortgages at HSBC, said: “Landlords outside of London are reaping the benefit as young professionals say goodbye to capital living in favour of more affordable commuter towns.” Meanwhile, Johnny Morris, head of research at Hamptons International, said: “Cambridge has seen particularly strong house price growth in the last year, which makes up for a fairly average yield. The continued growth of the city means that it’s a safe bet, albeit at a high entry price.”
However, Morris warned that letting student properties may not be right for some, and added: ‘’Expats might want to think twice before dipping their toe into the student market, as student properties can be difficult to manage well. A mid-market two- or three-bedroom property in an area popular with young professionals will generally be much easier to manage from a distance.’’ All this information will be of great benefit to landlords who are thinking of expanding their property portfolios in 2015 and for those who are considering joining the buy to let industry next year.
In fact, a number of industry experts are already starting to publish their predictions for 2015, with Christopher Down, chief executive of property company Hearthstone Investments, claiming that Scotland will be the new buy to let destination. He claims that London along with other large southern cities may have had their day when it comes to buy to let investment as the markets are now saturated. Instead, he advises landlords to invest in property in more northern areas and Scotland including in Aberdeen and Glasgow.
One of the main reasons the private rental market is doing so well right now is because many people cannot afford to purchase properties outright due to the fact that prices have increased rapidly over the past few years. In correlation with this trend, buy to let lending increased from £5.9billion in quarter three of 2013 to £8billion in quarter three of this year. Andrew Montlake of mortgage broker Coreco said: “The likes of Natwest and Santander have got back into the buy-to-let market. This has driven rates down to levels never seen before. We are seeing this particularly in London as homeowners see the benefit of keeping London property as a long term investment.”
Meanwhile, Jonathan Harris, managing partner of Anderson Harris, said: “There is a general feeling that buy-to-let lending is a viable option again, although it is not the free for all of 2006/7. The rigours of the mortgage market review, introduced in April, and the capping of the number of high loan-to-value mortgages, have restricted the money coming into the lenders hence the focus on buy-to-let.”
Even though next year looks set to be profitable for landlords there are those that are concerned the General Election in May will have a negative impact on the markets. Due to the housing crisis and the lack of affordable housing across the UK a number of leading political parties have claimed that they will crack down on the private rental sector next year as well as create new schemes to help more people get on the market.
Regardless of where you plan to let properties in 2015 it is therefore of the utmost importance that you do your research into the market and ensure that your finances are in order so that you can protect your business from unexpected shortfalls. Don’t forget that PropertyQuoteDirect will be regularly updating our website with industry news next year, so make sure you come back and visit us in 2015!