Landlords in England and Wales who sold up last year did so for £79,770 more than they paid for the property, according to estate agents Hamptons.
For some landlords, the only option for dealing with the repercussions of tougher tax rules and stricter regulations has been to sell up and seek new investments with better yields. However, the blow of having to sell has been softened by the rapid growth in house prices over the past decade, resulting in many landlords making a significant profit on their property sales even after capital gains have been taken into account.
85% of landlords made a profit
Last year, landlords in South Tyneside, Sunderland, Darlington and Middlesbrough were more likely to sell their buy to let properties for less than they paid for them; but despite 15% of landlords across England and Wales making a loss when they sold up, the majority (who most likely had owned their properties for a longer period) made a substantial profit.
Landlords who sold London properties they’d owned for an average of 9.6 years made the biggest gain at £248,120 per property. Those selling in the South East reaped an average of £108,220, and landlords who sold property in the East made an average of £88,410 profit.
Focus on yields
While property sales have been rewarding many landlords with a substantial gain, house price growth is slowing, and property investors are shifting their focus from capital gains to yields. The UK’s average rental growth increased to 2.1% across the UK in April, the highest since January 2018, attributed to the 3.9% year on year increase in London rents.
Increasing rents means increased yields for landlords who have felt the pinch of decreased profits over the past few years. Landlords looking to invest in a more profitable property are encouraged to look north of London for the biggest rewards.
The average London rent is currently £773, but rents in the capital have only grown by 0.66% year on year. Edinburgh, on the other hand, has the highest rental growth of any UK city, increasing by 5.44% year on year, across Scotland recorded annual growth is 1.78%, and Wales has the second-highest growth on a country basis at 1.26%.
England might only have a rental growth of 0.91%, but certain areas offer a dramatically different picture. In Nottingham, annual rent growth to April was 3.84%, North Somerset 2.39%, Rutland 2.56%, Leicester 2.33% and South Gloucestershire 2.25%. Yorkshire and Humberside have seen rents rise by 1.34% and the South West rose by 1.24% year on year.
For landlords looking to make a new investment, location it seems is the all-important factor for increasing yields.