If you have invested in property based on price appreciation, you might want to re-evaluate your options. Going into the rental market means you can still benefit from that appreciation, but you will also profit from a steady and reliable income. Moreover, with the increasing demand for rentals growing, these earnings are likely to increase.
Booming property prices
2021 has been an exceptional year for the global real estate market. Prices in the UK surged by more than 10% over the year in December 2021. The US saw the highest recorded rise of more than 16% in 2021. Although analysts have been routinely predicting the arrival of a slowdown, there are no signs of it happening immediately.
Inevitably, many people are being priced out of the property market, encouraging more and more people to rent. It has been great news for landlords who have seen a flood of high-value renters moving into the property sector.
These are people with good incomes and savings who would usually be able to make purchases. For the time being, they are looking for rental accommodation of good standing that can offer a high quality of living. Furthermore, they are willing to pay for it.
Residential versus holiday lets
The pandemic shifted the focus of many foreign property investors, especially in hotspots such as Spain and Portugal. With COVID-19 restrictions reducing opportunities for international travel, many holiday lets found themselves sitting empty.
To generate a regular income, investors turned to the residential rental market, where local estate agencies upgraded their services to cater to the growing number of foreign investors seeking to enter the residential rental market.
What started as a temporary measure for many is turning into something more permanent as people wake up to the benefits of rental investments. Although they may not offer as much return per week as holiday lets, they require less overall management work and provide a regular and reliable income which continues throughout the off-season.
Changing demographics
Another change partly brought by the pandemic was the move away from city centres, accelerating the transition towards digitally-driven hybrid working practices.
It has seen people moving out of the traditional centres and sparked activity in new markets. Yields are surging in some areas, especially in the North of England, which has seen rental returns as high as 7% in a few places.
The market adapts to everything from student lets to young professionals and established families. With supply still low, rents quickly rise, especially at the top end of the market.
The net result is an environment which has seldom been more favourable for buy-to-let landlords. Rising demand, especially from high earning renters, and prospects of significant growth means rentals provide the outlook of a steady income and price appreciation in the property.
This combination makes it one of the most attractive forms of investment going.
Contact us today for more information on property investment in the UK and overseas.
