Demand for rental properties across the UK has leapt by 23% in a year, Rightmove research has found, putting more pressure on a market already in limited supply therefore pushing rents to a record high.
The number of people enquiring has gone up considerably driven partly by first time buyers putting their buyers plans on hold due to mortgage rates escalating.
This has led to an increase in rental prices as landlords realise the demand with the average rent now at a record £571 a week in London.
However, the availability and cost of mortgages has begun to stabilise following a frenzied two months after UK politics caused mayhem in the markets with indications rates could drop next year.
The average two-year fixed rate has come down from a peak of 6.65% a month ago to 6% now. Meanwhile the average five-year fix is now below 6% for the first time.
Mortgage rates are expected to settle at a higher level than buyers are used to in recent years. The Bank of England is expected to raise its base rate to 4.25% by Q2 next year, although that is lower than feared.
There has also been a huge surge in demand for rental units as students and workers have flocked back to the city post Covid. This is paired with a steep drop in supply – London just does not have enough supply to meet the ever-growing population demands.
A report conducted by Savills, the recent EME Investor Sentiment Survey, which has real estate investors with total EME assets under management exceeding £400bn, showed that multifamily and student housing are within the top five sectors targeted by investors in this period. The UK, Germany, France and Spain came out as the top European locations to invest.
The report indicated that over 33% of investors are looking to invest in student housing over the next 12 months. The increasing investor interest in the student housing sector is driven by a growing number of students attending university who rely heavily on Purpose-Built Student Accommodation (PBSA).
The survey predicts that this student number will continue to grow over the coming years, as the number of young people in Europe is forecasted to rise by more than 5.8% by 2027.
Simultaneously, a massive supply and demand imbalance is driving significant residential rental growth, causing large investor numbers to target the multifamily sector. Multifamily was revealed as the top sector favoured by investors.
Both student housing and multifamily sectors demonstrate strong rental growth and occupancy levels and counteracting the fluctuations in the current uncertain market conditions.
Despite record inflation and interest rate increases, investor sentiment remains very robust in these sectors. Kept afloat by long-term fundamental drivers, student housing and multifamily sectors have the ability to provide secure returns for investors in the UK.
As an international landlord owning property in the UK, it’s crucial to calculate all your expenses and what you can reasonably expect to get in rental profit.
There are a few important things that you need to budget for in order to profit from your buy to let investment.
Below are the most important to consider as a checklist:
Monthly Mortgage Payment
Lettings and Management Fee
Health and Safety Checks
Any Income tax.
All of these costs need to be factored into the rent you are asking for to maximize your investment. Planning for unexpected costs is part of successful budgeting. Always keep a detailed account of all your expenses.
To make things easier as an international landlord, a good property manager will give you the advice and guidance you need and track all your expenses.
Rental properties can be financially rewarding, but you need to know all the tricks of the trade.
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