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.
HS2 is the fastest running train in Europe connecting London to the top 3 Northern Cities of UK. This train will cut the journey to Birmingham to just over 45 mins which is the same as getting from Central London to some Outer areas of London! This means the working sector can commute far more easily between the capital and their offices in Birmingham.
The redevelopment of the Birmingham Curzon St Station together with the Big City Plan will introduce a huge number of jobs in the city. It is the largest regeneration in the history of the Northern Cities of Birmingham, Manchester and Liverpool so the population is expected to go up exponentially.
There will be a huge increase in tenant demand from renters who will leave London to move to cheaper property and work in London and from renters in Manchester and Liverpool who will move to Birmingham to commute weekly to their head offices in London.
The commercial sector of Birmingham will become the largest business, professional and financial hub in the UK outside of London with already a huge number of Fortune 500 companies having their headquarters in Birmingham as a knock on effect of being the closest largest city to London driving up the population.
Just this reason alone will drive up property prices stratospherically in this decade. Off course, there are several other major reasons why Birmingham should be your next purchase.
For further information on this or to know which properties are available in Birmingham City Centre, please contact us.
Last week the UK government announced its first mini budget since Liz Truss became prime minister.
There were several moves specifically designed to boost the country’s economy through the current climate.
The most notable for the housing market was the permanent Stamp Duty Tax cut and the Corporation Tax cut. The government has also vowed to increase UK housebuilding to keep up with the growing demand.
While this is much needed in the long run, with Bank of England needing to control inflation, interest rates will need to rise further in the interim.
For finance buyers this isn’t what they want to hear, however with savings on house prices at this time, the falling pound and the new stamp duty savings, they can look to take advantage of the market and possibly refinance in a couple of years when they can reanalyze the rates.
For cash buyers, a softening market along with huge savings on the exchange rate at this time, presents the perfect opportunity to add to their portfolio.
In the next coming months, we will be able to see how the government will support the housing market as it has already shown its keenness to keep it as a priority.
For a conversation on how to take advantage of the current climate and make it work in your favour rather than sitting on the sidelines, please contact me
As the world economic climate continues to change, it is vital that property investors adapt to make the most of their investments and hedge against downturns.
1. Diversify Location:
Spread your assets in different parts of the country. Different cities perform at hugely variable levels. Whilst London remains the favourite choice, investors should divest their least profitable assets and relocate funds to Manchester, Birmingham and Liverpool which are upcoming areas with high returns and relatively low prices
2. Type of property:
With the world moving towards a hybrid way of working post Lockdowns, commercial investors need to bring in more residential real estate into their portfolios as more companies are allowing the work from home model a few days a week. Apartments and apartment blocks are a great addition.
3. Change up your investment and hold strategy:
Have a mix in your portfolio of properties which are bought for their rental returns, others for capital gains over a longer period of time whist others should be purchased with a window to sell in a couple of years and reinvest.
Contact one of our agents today who can guide you and help you reassess your portfolio or begin building one.
Typically replies within 10 minutes
Hi I’m a LIVE assistant.
Can I help you with any quick information you need?