Buy-to-let yields in the UK have now reached an average of 5.3%*, resulting in many investors moving away from traditional savings plans, choosing instead to put their money into real estate.
According to a new report from property investment company Select Property, buy-to-let investments are becoming increasingly popular in the UK as the struggling first-time buyer market boosts rental demand and high occupancy rates.
Figures from The Council of Mortgage Lenders demonstrate the strength of the UK buy-to-let market as the amount of money borrowed by buy-to-let landlords in Q1 2013 has increased 12.9% to £4.2 billion since Q1 2012.
The appeal of buy-to-let investments is easy to understand as LSL Property Services has announced that the average rental yield in the UK for April 2013 was 5.3%, a figure far higher than alternative asset choices such as stocks and shares.
Yields vary across regions with the North West being identified as the most successful buy-to-let market, with returns reaching 7.2%. HSBC has specifically highlighted Manchester as a good city in which to invest as real estate is relatively inexpensive.
Property size also affects yields and in its April 2013 Monthly Lettings Index, Countrywide identified that one-bedroom properties have been the most successful, typically giving yields of 6.8% – a 1.1% increase in the last 12 months.
The hunt for the best return is also prompting investors to look at new avenues, with student accommodation becoming increasingly popular as it can produce yields as high as 9.6%, nearly double the UK average.
Director of Select Property, Giles Beswick, said: “The UK buy-to-let market is thriving as investors search for alternatives to traditional savings accounts and pension plans.
“New opportunities, like student accommodation, are emerging as strong investments as the number of students increases and the shortage of quality ‘beds’ is highlighted. It’s factors such as these that contributed to student property being the UK’s No.1 asset class in 2011.”
*LSL Property Services April 2013 buy-to-let index