Rental income set to increase over the next 5 years

Rents are set to surge by 15% over the next five years, as a shortage of properties pushes up prices, the Royal Institution of Chartered Surveyors (RICS) has predicted.

The reduction of new property coming to the market last month was the most striking aspect of the market, with 22% more surveyors noting a fall rather than a rise in new landlord instructions. It is the eighth consecutive month of declining supply.

The shortfall will have a limited impact in the short term, raising rents by around 2% nationally, but by 2023 there will be a significant increase in costs for tenants, according to the findings.

The whole Country has shortages of good living accommodation

The body blamed buy-to-let tax changes for pushing small landlords out of the market and said the fall in instructions was “evident in virtually all parts of the country”.

High demand for rentals

A growing number of landlords have reported ‘increased’ or ‘significant’ demand for their buy-to-let properties in the second three months of the year, according to research.

This indicated tenant demand had hit the highest level since 2016, which will come as good news to anyone considering entering the buy-to-let investment market or expanding an existing portfolio.

It is good to see that tenant demand reported by landlords has hit the highest level since 2016 which is driving the confidence in the market.

Quarter two of 2020 was a time of real uncertainty, and this was reflected in the record low levels of demand that landlords saw. Demand bounced back the following quarter and has been rising ever since. This highlights resilience of the private rented sector and suggests that a growing number of people have turned to it at a time when the stability of a good quality home is ever important.

Landlords looking elsewhere for more profitability

The average rent on a UK holiday let during peak season has reached £1,556 a week, according to new data. This compares to the average rent for standard residential tenancies of £1,029 a month, according to figure just released.

The average holiday rent during mid-season is £1,107 a week and for low season it is £795. However, in the south-east of England the average high season rent is much higher at £1,910 a week. The south-west of England is close behind at £1,769, followed by the east at £1,569, Wales at £1,418 and the north-west at £1,302.

Scotland has the lowest average weekly rent for holiday homes peak season at £1,222. Hodge business development director Emma Graham says: “When brokers and intermediaries come to us with a holiday let application we ask them for the average rental yield for that property, from that we can calculate how much an average rental for that region is during the different seasons.

Buy-to-let remains strong

Changes to tax relief and a 3% increase to the rate of stamp duty on buy-to-let purchases was predicted to cause a mass exodus of landlords but the research found that just 10% have sold part of their portfolio in the last five years.

And just 19% said they had plans to do so over the coming five years. The main reason for that was that landlords had become tired of dealing with tenant issues.

The next biggest factor when considering a buy-to-let investment is retirement, with most landlords looking to sell up in order to enjoy their golden years.

However, the previous changes to landlord tax relief did rank as the third most influential factor, while the increase in stamp duty tax followed closely behind.