New research from peer-to-peer lending platform Sourced Capital has revealed the best places around the country to invest in the rental market. The findings are based on current rental yields across the UK property market.
Over the last five years, investment into the real estate, renting and business sector increased by 48.4%. This is one of the largest increases in the non-manufacturing industries behind construction and other service sectors in terms of performance. So despite Brexit uncertainty hitting house price growth, as well as changes to tax regulations and a hike in stamp duty thresholds for buy-to-let landlords, the UK property market is still a good bet for investors.
The average rental yield across the UK is around 4%, but there are some hot spots around the country that are consistently delivering higher returns than the national average.
Scotland continues to top the charts at 5.8%, with 14 of the best 20 areas for current yields located north of the border. Glasgow ranks first at present with yields hitting 7.8% on average, followed by West Dunbartonshire (7.2%) and Inverclyde (7.1%).
Northern Ireland comes second, with yields averaging 5.4%, and Belfast is currently delivering 6.4%.
Yields in England average 4.1% with the North East (4.9%), Yorkshire and the Humber (4.5%) and the North West (4.4%) home to the most favourable rental yields. Burnley ranks at number six in the UK as a whole and the best in England, with the average rental yield currently at 6.6%. Other areas outside of Scotland to make the top 20 include Blackpool (5.9%), County Durham (5.8%), Pende (5.8%) and Hyndburn (5.8%).
For landlords already in the market, London is still a good investment. According to Rightmove’s latest Quarterly Rental Trends Tracker, asking rents are rising nearly twice as fast in the capital than in the rest of the country. London asking rents have hit a new record average of £2,119 per calendar month (PCM) as ongoing lack of supply means rents are 4.2% higher year-on-year, and the rest of Great Britain is up 2.4%
Other findings show that:
- Over the past 10 years London asking rents have risen almost twice as fast as the rest of Great Britain.
- Average asking rents outside London have risen by 24%, compared to 45% in the capital.
- In cash terms, London asking rents are up by £658 PCM compared to £159 PCM outside London over the last decade.
- North East rents have grown the slowest, up 8.4% from £554 to £601 PCM in ten years.
Stagnant house price growth last year led to a boost for rental yields due to a fall in property values coupled with consistently high rental demand. The so-called ‘Boris Bounce’ following the General Election, means that many industry commentators now think the market has bottomed out. According to Sourced Capital this has led to a flurry of activity in the rental market as investors rush to secure the best deals before returns start to tighten. So the message for investors is “commit now while the market is still finding its feet”.
Here at Team Ringley we are working with funds and institutional investors to create next-generation renting propositions in both the affordable and market rent sectors, in London and beyond.