In 2000, buy-to-let accounted for 4% of mortgage lending, by the second quarter of 2015, this had risen to 16%. According to property firm Savills, landlords have made nearly £180bn in capital gains since 2009 alone. Separate research has suggested that returns from rents and price growth over the past year have hit 8% in some parts of the country.
Savills expects that over the next couple of years, rents will rise by an average of around 2%-2.5% a year. In under-supplied urban areas, such as London and regional cities such as Manchester, it should be upwards of 3%.
Peter Armistead of Armistead Property commented: “It’s not surprising that the sector is booming with the impressive yields, capital asset growth and growing demand for rental accommodation. Manchester has seen yields rise by an average of 4%-5% over the last 12 months and demand is outstripping supply. It takes an average just 14 days to find a tenant and void periods are almost non-existent.
Demand for quality accommodation in the City is soaring and this is down to an expanding student population; a rise in post graduates staying in the City for work; new employers such as the BBC; and the general attractiveness of Manchester as the best liveable city in the UK.
Supply is currently very restricted. New builds dropped to almost nothing during the 2008-2012 period and has only recently started to take off again. Meanwhile, planning rules relating to older properties and conversions still make it hard in practice to increase the number of HMOs.
So increased demand and restricted supply is a huge positive for the local investment market. An average residential property in Manchester is just £155,000, while a flat in a good area, costs as little as £120,000. A property in Manchester can provide a 5% minimum cash rental yield and a typical 12% total cash yield, including 7% capital appreciation. Demand for rental accommodation is strong and by comparison with other regions, housing is cheaper.”
