Growing tenant demand pushes buy-to-let returns higher

Growing tenant demand pushes buy-to-let returns higher

Strong tenant demand in the second half of 2014 saw a 4.2% rise in the average rent of new lettings contracts.

Summary:

  • Buy-to-let yields are increasing at a fast pace in the UK
  • Unusually, 7% more potential tenants registered during the second half of the year than the first six months
  • The private rented sector looks set to offer further investment opportunities in 2015

New buy-to-let property investments saw a 4.2% rise in average rents towards the end of 2014, according to new research from Countrywide Residential Lettings.

The group found that instigating this yield rise was an increase in tenant demand, with 7% more potential tenants registering during the second half of the year than the first six months – traditionally the busier period for the lettings industry.

Countrywide explained that the movement of households between the sale and rental tenures has had an impact on shaping growing demand in the second half of the year, with 14% of the households that moved in England last year changing from the owner occupation to the rental sector.

This meant that there was a more general rent rise, with a quarter of tenants who chose to renew their contract at the end of 2014 experiencing a rent rise of 2.9% over the year.

Nick Dunning, Countrywide Group Commercial Director, said demand for rental accommodation remains high.

He added: “For investor landlords, understanding when the best time to let a property is key to reducing void periods and securing the highest rent. Landlords looking to rent a flat to students in November will find it considerably more difficult than if they were letting it in July.”

Countrywide said the outlook for the rental market in 2015 favours landlords and property investors, as many tenants will be in less of a hurry to buy than they were a year ago.

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