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UK Cities With Best and Worst Property Investment Yields

UK Cities With Best and Worst Property Investment Yields

Best And Worst UK Property Investment Hotspots

Rental returns on buy to let properties are best in cities like Southampton, Manchester and Nottingham, where as many as one in four properties are owned by landlords in the private rented sector.

Portfolio landlords and property investors are looking beyond London to identify regions where rental yields are almost three times as high as in the capital.

Rental yield is calculated by measuring the rental income against the properties cost

The latest data on buy-to-let yields provided by the HSBC bank, also shows the proportion of properties in each area that are already owned by landlords, with landlords already owning more than one in four properties in many of the top-yielding areas.

HSBC’s report draws on official data from the Office for National Statistics (ONS) and the UK Land Registry with rental data provided by Home.co.uk.

Top Property Investment Hotspots Revealed

Top Property Investment Hotspots Revealed

  • Southampton, currently tops the list for rental returns with rental yields of 8.73% Manchester has rental yields of around 7.98%
  • Nottingham has rental yields of around 7.67%
  • Blackpool has rental yields of around 7.63%
  • Hull has rental yields of around 7.47%

In all of these areas, except Hull, private rental sector (PRS) landlords already own more than one in five properties.

These areas offer relatively low property prices and have strong demand for rental property from large student and young professional populations – the characteristics that the experts say make for excellent buy-to-let investments.

Top 10 Property Investment Hot Spots By Rental Yields

Rank

Location

Housing privately rented (%)

Average house price

Average monthly rent

Gross rental yield (%)

1 Southampton 23.42 £143,011 £1,040 8.73
2 Manchester 26.85 £104,244 £693 7.98
3 Nottingham 21.64 £86,000 £550 7.67
4 Blackpool 24.16 £77,899 £495 7.63
5 Kingston upon Hull 19.02 £68,243 £425 7.47
6 Coventry 19.02 £110,029 £650 7.09
7 Oxford 26.11 £254,514 £1,489 7.02
8 Portsmouth 22.28 £146,709 £795 6.50
9 Liverpool 21.75 £91,175 £494 6.50
10 Cambridge 23.91 £185,414 £1,001 6.48

The lowest rental yields were registered in areas such as London where recent property price rises have outpaced the growth in rental yields and in some areas like Westminster 38% of property is privately rented.

Worst 10 Property Investment Areas By Rental Yield

Location

Housing privately rented (%)

Average house price


Average monthly rent

Gross rental yield (%)

Kensington and Chelsea 33.97 £1,236,605 £2,968 2.88
Thanet 21.96 £189,362 £524 3.32
Hastings 27.19 £184,787 £520 3.38
Haringey 30.33 £425,541 £1,200 3.38
Westminster 37.56 £890,272 £2,578 3.47
Hammersmith and Fulham 30.05 £685,797 £2,004 3.51
Richmond upon Thames 20.55 £540,379 £1,699 3.77
Camden 30.46 £715,831 £2,383 3.99
Ipswich 18.75 £158,925 £546 4.12
Lincoln 19.36 £124,789 £433 4.16

Head Of Mortgages at HSBC Peter Dockar, said: “House prices in the top-yielding locations – while still out of reach among many first time buyers – are relatively affordable for landlords investing in property and the demand from young professionals has pushed up rents and driven up the returns. London is often seen as the haven of property investment with many believing the streets are paved with gold. However, while the highest rents in the country are an attractive draw for landlords, high house prices in the capital squeeze yields and limit the returns available. As a result, returns can often be far more attractive in other areas so it certainly pays for landlords to do their research.”

 

Good news for landlords

Good news for landlords

There is a lot of Good News For Landlords Around As PRS rents Increase, Tenancies Last Longer And Demand Remains Strong

Good news for landlords as monthly PRS rents have increased by 1.1% year on year to average £845 (GBP) per calendar month (pcm). Scotland has witnessed the greatest rental price increase at 6.7% compared with the first quarter of 2013.

There has also been an increase in the number of older private rented sector tenants according to the latest quarterly index published by Countrywide lettings agency, who noted a 6% annual growth in the number of tenants over the age of 50 renting property in the UK private rented sector (PRS). The lettings agency also report that there has been a 7% annual decline in the number of tenants aged under 25 in the second quarter of 2013.

Buy-To-Let yields are strengthening across the UK, with the average yields being recorded in 3 regions:

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Hi all I read the following article in the Guardian this week and I thought I would share it with you as I happen to agree with the viewpoints stated by the author Heather Kennedy.

Please take a couple of minutes to read the following…. 

Is Shelter’s campaign against ‘rogue landlords’ helpful for private tenants?

Law-breaking landlords aren’t the sole blight on the private rented sector, despite Shelter’s eye-catching campaign

How do you feel if I say the words “energy performance certificate”? What about “London landlord accreditation scheme”? Is your pulse racing? I didn’t think so.

The dry and cumbersome language of the private rented housing sector is not exactly the stuff of captivating media headlines. For those of us trying to shout from the rooftops about how bad things are for private tenants right now, this can present a problem.

One organisation that has succeeded in capturing widespread attention is Shelter, with its simple and popular ‘evict rogue landlords’ campaign. The housing charity is encouraging residents to report dodgy landlords to their local authorities, who can take legal action if they are found to be operating outside the law.

The message has gained traction. Across the public debate on welfare and housing, the concept of the “rogue landlord” has caught on fast. It is central to our understanding of what is wrong with the private rented sector.

So if talk of ‘rogue landlords’ has helped to make the difficulties of life as a private tenant mainstream news, what’s the issue?

The problem is that Shelter’s concept seduces us into believing the deep-rooted problems in the private rented sector can be eradicated by punishing a small, malignant minority when in fact large-scale policy overhaul is now urgently needed.

There are plenty of fully legal landlords happy to bully their tenants, impose huge rent increases and end contracts on a whim.

Some renters and their landlords have come to consider this acceptable behaviour, so a rogue is always someone else: someone a friend of a friend told you about, or that one you saw on the telly. Never the landlord you have – or the one you are.

Of course unlawful evictions, harassment of tenants and illegal hazards need to be tackled. But I speak to private tenants across London every day and for most of them, current legislation offers them little or no protection against the problems they face.

For those landlords who are operating illegally, local councils have a feeble track record at prosecuting them, as Shelter points out. What Shelter doesn’t explain is how councils are supposed to find the time and resources to deal with the spiralling number of complaints from tenants, and at a time when funding for local authorities is being cut by central government.

Councils are already overwhelmed by the sheer volume of complaints they receive and can often only hope to provide basic dispute resolution between landlord and tenant.

For Shelter to suggest that we can prosecute our way out of this problem using current legislation is at best naive and at worst disingenuous.

The figure of the rogue landlord as a modern-day folk devil might be media-friendly, but it is meaningless for the majority of private tenants.

We need nuanced debate about the private rented sector, to reflect the diverse and complex experiences of tenants.

Shelter does some excellent work getting housing issues into the mainstream press, but right now its analysis is being allowed to dominate the debate.

Unlike council tenants, who have rich a tradition of self-organisation and representation, private tenants have no collective identity or voice.

This is partly why we’ve found it so difficult to challenge unfair treatment. It’s only now, as pressures on private tenants reach an apex that we’re beginning to speak as one and forge this collective voice.

Not until tenants are allowed to define their own campaigns and solutions will we begin to see the deep rooted change to the private rented sector we so desperately need.

Heather Kennedy is the founding member of Digs, a support and campaign group for private tenants in Hackney

This content is brought to you by Guardian Professional. Join the housing network for comment, analysis and best practice direct to you

Reducing PRS Rental Prices Could Kick Start The UK Economy

Reducing PRS Rental Prices Could Kick Start The UK Economy

Whilst the UK Government have presented the nation with the idea of building more affordable homes in the social sector and promises of further regulation, licensing and reform of the private rented sector, there is still a case that lower rental prices are vital for economic recovery.

Pete Jefferys, part of the policy team at Shelter stated that lower PRS rent is vital for the UK’s economic recovery, if average PRS rents in the UK had risen in line with the rate of inflation since the year 2000, rather than well above, then tenants would have an extra £8 Billion (GBP) per year of disposable income.

Increasing rents for private rental sector tenants are beginning to become a sensitive political issue, especially in areas of high demand including London and the South East.

Private sector tenants are trapped between the expense of renting and unobtainable or unaffordable mortgages, with banks and mortgage lenders tightening lending criteria and demanding larger deposits for property purchases than they were prior to the financial crisis.

While this trap is frustrating for those who want to buy and devastating for low-income families with few other options, it may also be having an impact on the economic recovery of the UK.

Tenants renting property in the private rental sector are increasingly paying more in housing costs than those buying a property with a mortgage.

For some low-income tenant renters, the proportion of their wage going towards rent can be over 70%, especially in London.

Lower PRS Rent Vital To UK Economy

Lower PRS Rent Vital To UK Economy

The homeless charity, Shelter say they have collected evidence that increasing housing costs and financial uncertainties mean that tenants are attempting to reduce spending on many consumer goods and services, and due to falling household incomes, increasing numbers of tenants are being forced to use high cost credit to make up any rental shortfall, incurring high repayment charges and eating up even more disposable income.

The cumulative gap between rental costs and wages was growing in London before the 2007/8 financial crisis but now in 2012 it has grown even wider.

There are 8.5 Million tenants renting property in the UK, in London tenants pay on average, between 42 – 46% of their income on rent and economists say that there is a strong case that a lot of potential consumer spending is being lost and that the UK faces a demand crisis because there isn’t enough being spent on British products in shops to get people back into work.

Many landlords rent out just one or two properties and are using the rental income to pay off mortgages and earn a small yield. The result is that the amount of money being paid in rent is financing mortgage debt and not being re-circulated into the country’s economy. If banks were re-lending this money, again it might not be a problem. But, as we’re constantly hearing – bank lending has dropped massively since 2008.

Even if all rent went straight into the pockets of landlords there would still be a case that this is reducing spending in the economy. Higher earners spend proportionately less of their income compared to lower earners and on average landlords have higher incomes.

If average PRS rents in the UK had risen in line with the rate of inflation since the start of the new millennia rather than well above it, renters would have more than *£2,000 (GBP) extra per household per year

That would have meant far more going directly into the pockets of those on a lower income to be spent within the UK economy than the proposed VAT cut (offered by the Labour opposition and would cost the Treasury £12 Billion (GBP) per year).

High price rents in the PRS increase the housing benefit bill, which currently costs the government more than £20 Billion (GBP) per year, having doubled over the last decade.

The balance of UK Government spending on housing has shifted away from house building to covering housing benefits.

If 8% of private rental sector tenants moved to more affordable social homes, the UK Government would save up to £200 Million (GBP) per year.

Building more affordable council houses has the advantage of reducing pressure on the private rented sector and would increase spending power dramatically for those families who are in social rented properties.

A recent Shelter report stated the case for reform of the UK private rental sector proposing five year, inflation linked tenancies with two month break clauses for tenants.

The benefits of the Shelter proposition include stability for tenant families, more disposable income over the long term and are even supposed to be beneficial for many landlords’ business models.

Building more affordable social homes and reform of the private rented sector would help millions of tenants, currently struggling with the third highest housing costs in Europe, it would also put enough cash back into people’s pockets to sustain an increase in consumer demand that is not reliant on personal debt nor expensive tax cuts.

*3.62 million tenant households in 2010/11 paid on average £95 rent per week, if the median of £78 per week average rent from 2000/01 had risen with CPI inflation, rather than the actual 2010/11 median figure of £137 per week. Across the UK this equates to £7.9 Billion (GBP) extra rent paid per year, so on average a renting family would have £42 per week extra disposable income, or £2,184 (GBP) per year.

(*Figures from the English Housing Survey and Office for National Statistics).

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The number of owner-occupied households has continued to fall, according to the latest English Housing Survey.

The EHS 2010/11 survey says there were 14.45 Million owner-occupied households, compared with a peak of 14.79 Million in 2005.

By contrast, the number of Private Rental Sector (PRS) households has dramatically increased to 3.62 Million, compared with 2.45 Million in 2005.

In 2010-11

  • 66% of households were owner occupiers
  • 17% were private renters
  • 17% were social tenants.

The biggest shift towards renting in 2010/11 was in the 16 to 34-year-old age group.

  • 36% of this age group were in owner occupation
  • 18% were social renters
  • 46% were renting privately.

When compared with 1991, 60% of this age group were owner occupiers and 18% were renting privately.

The average household size for all households was 2.3 people, with 29% of all households containing just one person.

Owner occupiers were richer than private tenants, but paid less on a mortgage than tenants did on rent. An owner-occupier household had an annual income of £40,900 (GBP) compared with £29,000 (GBP) for private tenants. Owner occupiers made average weekly mortgage payments of £143 (GBP), compared with average weekly rent of £160 (GBP).

On average, weekly mortgage payments were 19% of home owners’ income, while weekly rent payments were 43% of tenants’ income. Private tenants had the highest housing costs of all three groups – owner occupiers, private tenants and social tenants.

The English Housing Survey also noted a significant fall in the number of households with a mortgage, down from 8.3 Million in 1996-97 to 7.1 Million in 2010-11.

There has also been a major change in the type of mortgage: in 1996-97, 33% of mortgages were repayment loans, while in 2010-11 this had increased to 73%. Only 3% of mortgages were interest-only in 1996-97, but the proportion had increased to 13% in 2010-11.

The survey found that 59% of private tenants and 23% of social tenants expect to buy a residential property at some point, and 16% had considered buying a home in the previous 12 months.

However, there was not much confidence about UK property prices: in nearly every region other than London, a larger proportion of households thought their property value had decreased rather than increased in value over the previous year. Around 1% believed they were in negative equity.

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