The demand for rental property in the UK is such that many experts are predicting that as many as 1 in 5 households will be living in rental property as tenants by 2016.
In order for this estimate to be accurate there will need to be an additional 1.1 Million more rental properties made available in the UK private rented sector.
Experienced property investors are expanding their rental property portfolios and the demand for rental property is so strong that many new property investors are being encouraged purchase property for longer term rental yields and become landlords.
UK PRS landlords are reported to control as many as 4.8 Million PRS rental properties throughout the UK, up from the reported 2.5 Million in 2002.
PRS rental properties in London account for 27% of all residential properties while social renting now accounts for just 24%.
However, due to the apparent shortage of suitable buy-to-let mortgages available to experienced investors, cynicism over the perceived profits that can generated by buy-to-let property in the current market and low rental yields in some parts of the country, many potential new landlords are still waiting for the right time to invest in property.
The top 5 highest value rent locations – all in the South East:
The top five lowest value rent locations – all in the Midlands and the North:
There will never be a better time to invest in bricks and mortar, the UK and USA witnessed a huge property crash with the bursting of the property bubble and the global financial turmoil that followed in its aftermath. But now rising PRS rents and lower capital values are giving a much better return on cash than the banks.
The potential profits from buy-to-let investments are largely misunderstood.
Purchasing the worst properties in the best streets for the right prices are key to making a healthy profit from property from the start.
Evaluation of the property purchase in the long term will reflect if a property was a good investment or not. Property bought for Buy-To-Let purposes at the peak of the property bubble in 2007 may still be struggling to show a good return if outside London, but property bought for rental purposes back in 2003 should already be showing a healthy increase in capital value.
The cashflow side of property investment is all about rental yield. UK PRS rents have continued to rise over recent years and with the Bank of England base interest rate remaining at a record low, it provides the potential for greater monthly rental returns.
UK residential property has historically doubled in value every 8-12 years and has repeatedly done so for over 50 years.
In the last 10 years from 2002 – 2012, UK residential properties have increased in value by almost 50% across the UK. This repeating pattern suggests that UK residential property values could rise by at least 50% again within the next 10 years.
Profiting from UK Buy-To-Let properties starts with getting a discount at purchase, buying Below Market Value (BMV), capital growth in the long term and cashflowed by healthy rental yields during tenancies.
UK rent increases over the last 12 -18 months have averaged around 5.2% and Savills have forecast 20% rental growth over the next five years with a 3% rise expected during 2012.
Research by property portal, Rightmove, indicates that over 60% of UK PRS tenants are expecting rents to rise over the next 12 months.
Rental yields currently range from 7.8% for the top performing 10% of UK PRS rental properties to just 4.4% for the bottom 10%, with the highest rental yields being achieved by the lowest value properties.
London has the greatest extremes, with the top performing 25% of locations yielding an average 7.0% gross, while the bottom 25% yield just 3.9%.
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