Stronger annual returns for buy-to-let

Following on from recent research by ludlowthompson, recent findings on the buy-to-let market show that despite rents falling landlords are still gaining.

LSL Property Services reports that the average UK rent has fallen for the second month in a row, decreasing 0.6% in November.

In contrast house prices in November have increased for their seventh successive month lifting home values 5% since April 2009’s low.

Rents fell fastest in the South East, a drop of 3.3% in the month with over half of the country’s regions seeing similar declines.

However house prices have risen at double the speed of rents over the last seven months, and investors who bought property a year ago are achieving a total return of 4.1% on their investment.

This now far exceeds the best annual return on LSL’s records since June 2007.
 
David Brown, commercial director of LSL Property Services said: “Property bought a year ago and rented out is now making good returns for investors. Those who bought at the April low point are doing even better. Landlords are making impressive capital gains.” 

Brown admits: “To some extent the recent fall in rents is a seasonal phenomenon – we do not expect a repeat of the relentless monthly declines in rents seen from late 2008.”

For example, in November a typical rental property could make £809 in capital gains and earn £665 in rental income, which makes a total profit of £1,474.

According to ludlowthompson.com’s survey, buy-to-let investors are on the whole much more confident about the residential property market:
• 73% of buy-to-let investors believe house prices will continue to rise over the next six months.
• 89% expect rents to stay the same or increase. 
• Nearly a quarter (24%) expect voids to decrease over the next six months.

Stephen Ludlow, Director of ludlowthompson.com, London's Letting Agent, comments: “Buy-to-let investors are now optimistic on capital values, rents and voids.  If their optimism proves to be well-founded then residential property looks like an excellent investment option.  The effect of the end of the stamp duty holiday might create more demand for rented property as fewer first-time buyers enter the market."