There are now 13.8 tenants chasing each new rental property across the country, up 9.4 from January, according to a new report by Martin & Co, the largest lettings and property management franchise business in the UK, with a network of 194 offices.
The last 12 months have seen a revival of the lettings market with a 21 per cent increase in tenant demand and rental values rising by 5.4 per cent over Q3 2015 as it becomes considered more acceptable to rent a home. Rents are now 2.2 per cent higher than the same period last year with the rate of increase predicted to be 4.5 per cent over the next five years.
Ian Wilson, Chief Executive of Martin & Co comments: “The UK rental market has never been stronger and ‘generation rent’ will be the only option for most people in the coming years. With housebuilders struggling to meet new home targets and house prices continually on the rise, there is a genuine push to highlight renting as a first choice for housing needs. There are great opportunities for smart property investors to enter the buy-to-let market.”
In the report, Martin & Co has highlighted some of the most profitable investment locations, analysing different hotspot sectors which are seeing high levels of rental demand. These sectors include the northern powerhouse, commuter towns, seaside locations, best areas for tech growth and university towns and cities.
As the Government looks to push its ‘Northern Powerhouse’ policy, a BBC poll released this week showed that 44 percent of adults in the North of England have never heard of it and general awareness is extremely low. However, according to Martin & Co’s latest report, there are some fantastic returns to be had for those in the know. York has proven to be one of the best places to invest within the government’s dedicated growth area. The city is showing rental yields as high as 9.3 per cent for a two bedroom flat with Leeds, Huddersfield, Widnes and Pontefract making up the top five northern powerhouse locations. The boost in economic growth in these towns will have a knock on effect on employment opportunities helping to fuel demand for rental properties and thereby providing attractive opportunities for savvy investors.
The technological sector is another major source of economic activity in the UK, promoting entrepreneurialism and a young, footloose, start-up culture. This lays the foundations for a thriving rental market with locations across the UK offering attractive opportunities for investors. Wales is home to two of the top five locations, with Cwmbran showing average yields of 7.1 per cent for a two bedroom flat and Cardiff 5.5 per cent. Manchester, Romford and Leith also perform well with Liverpool, Bristol, Bournemouth, Bath and Loughton completing the top ten.
Commutability is another factor which drives tenants and buyers and with population growth and housing shortages in London driving up prices, people are beginning to look for homes inside the commuter belt where tenants can get more for their money. Walton-on-Thames offers the greatest returns for investors, with average yields of 5.8 per cent for a four bedroom house. Tonbridge, Chelmsford, Caterham and Stevenage are also in the top five performing markets showing yields of 5.1 per cent, 4.9 per cent, 4.8 percent and 4.7 per cent respectively.
University towns represent a well-established market for buy-to-let investors but Martin & Co has found the most profitable towns to be Coventry, Aberdeen, Dundee, Glasgow and Sheffield. All offer yields of five per cent or more on a four bedroom house, ideal for student tenants, with Coventry showing returns of 7.7 per cent. Of all the university cities studied, three of the top five are in Scotland in areas which have shown significant economic growth.
Similarly, Scotland has topped the table for seaside investment opportunities, with Ayr averaging a yield of 7.6 per cent for a two bedroom holiday home. Blackpool, South Shields, Whitley Bay and Bognor Regis have also performed well and offer attractive returns for the informed investor looking to secure high initial yields or the prospect of future capital growth.
Michael Stoop, Group Managing Director, comments: “Average yields are shown to be relatively consistent across all five location types but can differ enormously within each sector grouping. This sheer diversity of returns shows up some very attractive opportunities for the informed investor to secure high initial rental yields or, in time, future capital growth. It is often the little known markets, many of which are highlighted in the report that can offer the sweetest returns for those in the know.”
We commissioned three market intelligence reports that will give you an insight into your next investment decisions. You can find information on rental hotspots, high price-growth sectors and which types of properties perform best according to region. To download and view your free market intelligence reports, please register your details on martinco.com/askmartin