Adapting to any ‘new normal’ market conditions, trends and housing-related fall-out from the Chancellor’s Summer Statement is crucial to the ongoing success of any landlord’s property portfolio.
Yield and rental prices have been obvious constants in the buy-to-let sector since the beginning of time, although many landlords and their tenants are currently facing additional financial pressure which could impact these vital components. Meaning that forward-thinking property investors need to be keeping an even closer eye on an array of influencing factors amidst such transitional market conditions and be prepared to react accordingly.
So, let’s take a brief temperature check by evaluating the latest Buy-to-Let Rental Barometer from Fleet Mortgages for Q2 2020.
This outlined that rental yields on residential buy-to-let properties stood at an average of 5.3% across England, easing down 0.4% from 5.6% achieved in the second quarter of 2019. The North West of England posted the top regional rental yield figure for the quarter, up 0.6% year-on-year to 7.6%, while the East Midlands posted the biggest year-on-year fall of 2.1% down to a 4.4% yield from 6.5% last year.
Over the quarter there have been over 1% falls in the North, Yorkshire & Humberside and East Midlands, with smaller falls posted in the South West, East Anglia and Greater London. The three regions to post positive rental yields over the period were the North West, West Midlands and the South East. Fleet suggested that the overall data represented softer rental yields across England but with few signs of immediate falls.
Additional data from ARLA Propertymark’s Private Rented Sector (PRS) May report found that many landlords have chosen not to increase rents in an effort to recognise the financial difficulties facing many tenants. As a result, the number of tenants experiencing rent increases fell to 14% – the lowest since records began.
Similarly, more tenants were suggested to have been successful when asking for a rent reduction, with the number of tenants negotiating rent reductions increasing to 2.5% in May – the highest since March 2019 when the success rate was 2.9%. Due to the housing market pause, landlords were unable to show prospective tenants new properties and therefore the report highlighted that the average time properties were empty between tenancies increased to five weeks.
Whilst a number of still unknown factors – namely the depth of the economic issues facing the UK, the speed of any recovery and the performance of the housing market – will continue to influence the BTL sector over the second half of 2020, this data reflects a robust and responsible buy-to-let landscape. The private rented sector will continue to be pivotal in meeting housing demand for a host of UK residents moving forward, meaning rental yields should remain relatively robust across most regions.
Empathy has been shown by many landlords to those tenants who have struggled throughout this period and the importance of a collective and accountable approach from all links in the BTL chain should not be underestimated in order to successfully navigate this tricky period.
