While there will be many landlords who are pleased to hear about rising rents in the United Kingdom, it is vital to look at the bigger picture. Recent studies indicate that even though rents are on the rise, buy to let yields are actually falling, which means that many landlords face a challenge in running their business. It is still possible to make a profit and be a success as a landlord but it is essential that landlords operate in an effective and efficient manner. At Geoffrey Matthew, we are here to help.
Information provided by Your Move Buy To Let Index suggests that rents are up by an average of 2.4% year on year in England and Wales. In October of 2017, the average rental yield in England and Wales was listed as 4.4%, which is down from the 4.8% return recorded in October of 2016.
Not all regions perform the same so consider where to invest
When looking at these returns, it is important to note that they are the average for the entire region and that some areas are performing more strongly than others. In the north of England, the North East delivers a return of 5.1% and the North West offers a 5%. In the south, the return in London is listed at 3%, with the South West and South East of England both offering a return of 3.3%.
While more expensive property areas will often deliver a lower buy to let yield, historically, these areas offer a stronger level of capital growth. This provides investors with a decision to make. When it comes to short term returns, focus on areas where the rental yield is stronger and for a better return in the long term, focus on the highest capital growth.
The East of England can provide a good middle ground
Of course, not everyone is looking to achieve one or the other, many people are keen to enjoy the best of both worlds. This is where options available in the East of England may provide you with a reliable solution. When it comes to investments, many people are happy to spread the risk or take the middle ground. Rather than pinning your hopes on a short or long term return, there are ways in which you can obtain a balanced return on your investment.
A quick guide indicates where Harlow and Stevenage sit with respect to average property prices in comparison to the key areas of the South and North of England, and you can see why these areas would fit well as a middle option.
· London £640,381
· Harlow £313,909
· Stevenage £291,811
· Newcastle Upon Tyne £198,238
· Manchester £180,650
When you consider the expected rental yield for the SG1 postcode area, considering data from the rentalyield.co.uk website, you will find that a one bedroom property offers a yield of 6.3% and that there is an expected rental yield of 6.18% for a two bedroom property.
With affordable property options, a strong expected rental yield and a location that offers local amenities alongside reliable transport options to and from London, it is easy to see why areas like Stevenage can meet the demand of modern day property investors.
Even if expected buy to let yields are dropping across the country, this doesn’t mean that this is the case in every location. There is an opportunity for property investors to make a good return if they do their research and look beyond the familiar property investment options. If you are looking to obtain a solid return on your property investment, come and speak to Geoffrey Matthew and we will be more than happy to help.