Buy-to-let yields are rising faster than house prices across the UK


Landlords have seen rental yields soar to their highest level in two years, amid signs of easier times ahead for the buy-to-let market.

Average rents in the first quarter of this year reached £896 a month across the UK, according to new research from Kent Reliance for Intermediaries, which is a record high for the country and the biggest rise seen since 2017.

On average, house prices are increasing at a slower rate – although there are significant regional variations – and the average rental yield has been pushed up to 4.5% for the first three months of 2019, while in London yields hit 4.1%, which is the highest seen since 2015.

Committed investors could see opportunities

The report by Kent Reliance does show a slowdown in the market, with some landlords losing confidence in the sector amid a raft of changes targeting investors, but this could be set to change as yields pick up.

Andy Golding, chief executive of OneSavings Bank, which trades under the Kent Reliance for Intermediaries and InterBay Commercial brands in buy-to-let, said: “Landlords have rolled with the punches as best they can, but there is no escaping that growth is subdued in the private rented sector following four years of government intervention.

Brexit uncertainty has only compounded this issue, having the obvious knock-on-effect on landlords’ confidence.

“The positive news is that for those landlords looking to expand their portfolios, underlying market conditions seem to be changing. Yields are climbing as rents rise faster than house prices, providing further opportunities for committed investors.”

Over the past few decades, the private rented sector in the UK has snowballed, with the number of renting households almost doubling in the decade between 2007 to 2017 according to the most recent Office for National Statistics (ONS) figures. As more and more people rent for longer, with renters expected to exceed the number of homeowners by 2039, opportunities for buy-to-let landlords will likely only increase as demand grows.

Government changes could improve market

Recent regulation and tax changes have been put in place over the past few years, which many see as an attack on property investors and landlords. While the 3% stamp duty surcharge on additional properties has led some buyers to have to fork out thousands extra per purchase, Section 24 tax relief changes have affected some landlords’ profits and stricter lending criteria has made it harder for some to get financing.

Despite the changes, the sector has remained extremely resilient, but there have been calls among many in the industry to hold off on further buy-to-let interventions to give the market a boost. With the ongoing Brexit as well as leadership uncertainty, there have been many promises by politicians to take steps to help the sector, but it remains to be seen whether these will be followed through.

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Buy-to-let yields are rising faster than house prices across the UK


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