‘Content correct at time of publishing and subject to change’
Did you know that yields are rising for most landlords? The real question is, are there types of properties that are delivering better yields than others? In this blog, we will explore whether some regions and properties are currently providing better yields for landlords.
However, the consensus is that although house sales have obviously risen during the pandemic, so has the need for rental properties. Due to this demand, returns seem higher, as tenants are willing to pay much more for appealing features.
Factors that people seem to be paying more for include:
Suburban living
A garden/balcony
Private outdoor space
Extra space indoors such as an office
A minimum of 2 bedrooms
So, it is important to remember that just because suburban living is currently popular, this does not mean that tenants are leaving cities, this is far from the case. City life is still enjoyed by many people and tenants now have much more choice, with most securing three-year rental deals much easier.
Even though renting property has always been referred to as temporary, tenants are actually staying in their current homes for over 2 years on average and are renting for a total of 8 years altogether. Thus, renting property no longer seems to be considered a temporary living situation.
Tenant demand
Many landlords are reporting that tenant demand is growing as opposed to falling, right the way across the UK. Particular areas with the most demand seem to be the South West, Wales and the West Midlands. East Midlands and Yorkshire and Humber are following behind closely as high demand areas too.
Rising rents
4 in 10 landlords reported that rents are in fact rising in areas they currently let in. The rise in rent seems to be area sensitive with East Midlands and North West most likely to raise their rents, meanwhile, London is most likely set to reduce them.
Best yielding rental types
According to The Mortgage Works, even though detached houses are popular with tenants, they actually sit at the bottom of the rental yield chart, only delivering a 5% return. On the other hand, this type of property does grow in value the best, which could balance your profits over time. Other types of property tend to yield anywhere from 6% to 7%.
In terms of regions, the figures seem to vary similarly. London, unsurprisingly has the lowest yield of 5%, with the North, Midlands and Wales reaching returns anywhere from 6-6.5%. The South and East of England also sit on the lower end of the scale with possible returns of 4-4.5%.
An interesting find from The Mortgage Works is that those landlords that own their properties with a Buy to Let mortgage are surprisingly generating a significantly higher gross rental income than those who own properties outright. Leveraging a property through borrowing a large proportion of the purchase price is one of the more advantageous reasons it can deliver such incredible returns.
3-year high yields
Property Reporter has stated that there has been a 3-year high in rental yields, with yields increasing to 6%. Thus, this rise has fuelled landlords to invest and grow their property portfolios. So, the pandemic has served both the rental and home-buying market very well, with yields and house prices going through the roof.
As the pandemic starts to lift, it is expected that tenant demand will increase as people will likely be moving to new areas that may have been put on hold due to Covid-19.
At Twin Pine, we speciliase in helping landlords get a buy to let mortgage with bad credit. If you’re looking for advice on your first or next rental property, get in touch with us today.