UK PRS Rental Yields Increase

UK PRS Rental Yields Increase

In the UK the combination of high tenant demand, increasing PRS rents and realistic vendor pricing of properties for sale has been a major driving factor behind the increase in Buy To Let rental yields.

Buy-To-Let rental yields increased from 6.1% to 6.7% over the last quarter of 2012, with the biggest jump in the private rented sector (PRS) coming from houses in multiple occupation (HMO’s) up from 9.2% to 11.1%.

A much needed increase in the availability of buy-to-let mortgages, as well as property investors seeing the benefit of buying high yielding low priced properties for rental purposes, outside of central London and the South East where rental yields had previously been squeezed, has been fuelling the growth.

There has been a great deal of speculation that the UK private rental sector is becoming over saturated, but with the option to buy property not viable for many due to overly strict mortgage lending criteria, it seems that the rental boom looks set to continue, at least for the time being.

However, it has been noted that tenants are shopping around before committing to long term tenancies as they are increasingly concerned with the cost of utility charges and EPC’s are being used to make the decision to go ahead with the let of more efficient rental properties.

Energy Performance Certificate's Affect Tenant Choice of Rental Property

Energy Performance Certificate’s Affect Tenant Choice of Rental Property

Gas, electricity and water account for up to 20% of a tenant’s average monthly outgoings, so insulation and energy efficient heating is becoming a deciding factor for many would be tenants. Unfortunately though, any potential financial saving from utility suppliers is often countered with an increase in the price of the rent.

There are also a number of key factors deterring even the most optimistic potential buyers that are driving the extent of the current rental boom in the UK including a general lack of bank lending, the uncertain nature of employment thanks to the recession, and immigration as many who are new to the UK are not initially in a position to be able to buy property of their own.

Are these the green shoots of recovery or another false indicator?

Although, buy-to-let yields alone cannot predict better times for the UK property market, Buy-To-Let was the spark that ignited the previous recovery so let’s hope that the positive trend continues!

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