Total returns from buy-to-let properties have hit their highest level since November 2014, new data shows.
According to Your Move and Reeds Rains, the average landlord saw returns rise 11.2% to £21,988 in the last year, before any deductions such as property maintenance and mortgage payments.
Rising property prices contributed £13,594 while rental income made up £8,394 of the return.
Surveyors have reported a surge in buy-to-let investors looking to beat the April stamp duty deadline. The Royal Institute of Chartered Surveyors said in its monthly report that buyer enquiries rose for the tenth successive month in January, with the near-term pressure on prices intensifying.
Adrian Gill, director of estate agents Reeds Rains and Your Move, said: “Buy-to-let returns are building and property prices are picking up – as the housing shortage across the UK intensifies.
“Stamp duty premiums on new buy-to-let purchases are the rhino in the room – everyone is talking about the 1 April deadline and the extra purchase costs are perceived by some commentators as potentially hazardous. But this is a little simplistic.
“Right now in 2016 the big shift is likely to be in favour of existing landlords, potentially at the expense of those planning to start up as a landlord for the first time or expand their portfolio. As such, it will be interesting to see how the rental market responds if there is a disruption to investment in supply.
“But this is likely to be a short-term effect. Over the longer term there is a consistent and developing lack of housing for across all tenures, for a spiralling population. Owners and renters alike will see the cost of somewhere to live continue to rise, whether expressed in rents or prices. Stamp duty surcharges could funnel more money from the industry to the Treasury, but ultimately will not change the level of demand from tenants.”
Rents
Average rents across England and Wales accelerated going into the new year. In January, annual rent rises hit 3.6%, higher than December’s figure of 3.4%.
The highest rental growth was in the East Midlands and the East of England, up 5.9% and 5.8% respectively.
London was in third place, with rents in the capital 5.7% higher on an annual basis, marginally slower than the 6.3% growth in December. The South East and North East regions both saw a 1.0% annual fall.
Gill said: “Right now, canny tenants are taking advantage of the slightly cooler winter rental market, and securing tenancies with rents a little lower than in the peak autumn market last year. There are good deals to be had. But underneath this seasonality, rents are beginning to accelerate once again on an annual basis.
“There is a huge shortage of housing in the UK, particularly compared to an accelerating population and an economy that continues to outpace neighbouring countries. Meanwhile, real wages continue to rise meaning many tenants are able to pay a little more rent if necessary. In a competitive market that is a recipe for rent rises.”
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