Now is an exciting time to be a buy-to-let investor, says investment agency Surrenden Invest, even in spite of the ongoing soap opera that is Brexit.
While much of the focus about Brexit’s impact on the property market has centred on UK house prices, the UK’s rapidly expanding private rented sector has been rather overshadowed. However, according to Surrenden Invest, the expansion of the Build to Rent market and the rise of a more discerning buy-to-let investor acts as strong evidence that the rental sector is alive and well.
Recently, high-profile property firm Savills backed this up when they said that “tightening access to mortgage finance and changing demographics is driving demand for privately rented homes at all price points.”
In fact, Savills expects rents to grow 13.7% by 2023, with rental growth of 2.0% across the UK in 2020, 3.0% in 2021 and 3.5% in each of the following two years.
As mentioned above, investors are also becoming more discerning, courting longer-term tenants with superior rental homes
“As a whole, the UK has seen a reduction in the number of buy-to-let investors in recent years, as the government's tax changes have been felt across the sector,” Jonathan Stephens, managing director at Surrenden Invest, said. “However, an interesting result of this is that those investors who do continue to build their portfolios have become more discerning about which properties they choose to put their money into. This is pushing developers to be more creative and ambitious with their property plans.”
To acknowledge the continuing demand for premium investment properties, Surrenden Invest has produced a regional rental market report offering expert insights into the UK’s local rental markets. The guide covers five key areas (Birmingham, Liverpool, Manchester, Newcastle and London/commuter belt), examining everything from yields and void periods to demographics, tenures and average rents.
Although rental growth has been rather subdued over the past two or so years, the average rise across Britain of 1.0% in the year to December 2018 was up from 0.9% in the year to November, while the Savills projections also offer cause for optimism.
“The UK’s population is increasing rapidly and this is supporting a thriving rental sector that seems unabashed by the same kind of pre-Brexit jitters that are slowing down house price growth,” Stephens added. “Add to that the reduction in stock that we’ve seen as amateur private landlords drop out of the market and the overall rental sector has a very positive future ahead.”
According to Foxtons, there are now nearly nine tenant registrations for every new rental listing – the highest ever on record.
“One might imagine that unscrupulous investors are therefore flooding the market with inferior properties in order to capitalise on demand,” Stephens continued. “While there are no doubt some out there who are taking that approach, what our own experience has shown is that investors prefer to court longer term tenants by offering superior properties. The idea is that the building is so fabulous that tenants stay for longer than average, thus dramatically reducing void periods and driving up returns. As such, investors are being far more discerning about where they put their money.”