Strong demand, aligned with a shortage in rental properties, has led to rental inflation throughout the UK, improving rental yields for Buy-to-Let (BTL) landlords. The UK currently has an average rental yield of 3.53 per cent, according to data from Seven Capital, this varies significantly between regions.
A lack of stock has precipitated rental rises, yet the supply of premium inventory is increasing within the UK capital to satisfy this growing demand. Hamptons, the London estate agency, recently revealed data showing the average newly let property (outside London) took in rents 8 per cent higher than in February last year. South-East of England saw the strongest rental growth of 10.6 per cent, with landlords in Outer London experiencing rents increasing by an average of 5.3 per cent.
Some of this supply is found in pockets in London where investors are still able to find market leading yields. Rental yields of 4.7 per cent in Southall and 3.6 per cent in Wandsworth, for instance, are well ahead of national averages, according to data from Portico. Zoopla data revealed that London’s average rental yield sits at 3.8 per cent, with the strongest performers benefitting from transformation and regeneration of entire commercial or industrial districts as well as undertaking infrastructure enhancements such as Crossrail.
Savills expects rents to rise 17 per cent over four years to 2025 across the UK, whilst in London rents are forecast to rise 19.3 per cent. This has spurred a rise in new landlords purchasing property, particularly first time (BTL) buyers, given savings induced by the extended stamp duty holiday as well as low interest rates. Furthermore, data from the National Landlord Index indicates that 59.8 per cent of landlords are waiting for lockdown measures to relax before investing in properties.
Short term rental falls in prime central London (PCL) have attracted tenants from further afield. On average, those renting in PCL came from 1.5 miles away in 2019; this rose to 3 miles away in the second half of 2020 with 35 per cent of tenants in PCL coming from further afield in the second half of 2020 compared to 26 per cent in 2019.
Developments such as Greenview Court in Southall, and Bronze in Wandsworth, are enabling BTL buyers to bring more rental properties into the UK lettings market. With such restricted stock levels, this is a crucial trend in enabling housing supply to keep up with growing demand for rental accommodation.
Renters’ appetite for property in central London and its inner suburbs has jumped as life appears nearer to returning to normal as the COVID pandemic recedes, data from property website Rightmove showed