investment property investors housing market

Rental sector is “strong” for medium and long-term property investors

With the rental market expected to continue to grow, UK property is a strong prospect for property investors looking to the medium and long-term, according to agent. 

Investment in the UK housing market is often taken with a long view by property investors, who can gain ongoing income through rental yields as well as capital appreciation over time. Often, the longer you own a property, the higher your final returns when you come to sell further down the line.

With recent data indicating that property investors remain confident in the market, it seems one of the driving forces behind this is the ongoing strength and high demand in the rental market.

Another pattern taking place place in the private rented sector, according to Nicky Stevenson, managing director of Fine & Country, is that renters are increasingly expanding their search areas due to rising rental prices, and this could mean a rise in popularity of more affordable locations.

According to Rightmove, there has been a 50km sq increase in the vicinities that renters are looking for property in. This continues the pattern of certain commuter locations becoming more sought after, while it could also add to the drive that has already been reported of people leaving London for more affordable parts of the UK.

Fierce competition pushing up prices

Many property investors and landlords have experienced strong competition for their rental properties, with often large numbers of prospective tenants showing an interest in each property. This is putting pressure in tenants in the sector, but minimising void periods for property investors.

As Stevenson points out, average rents have increased by 11% annually in the prime rental market, and there doesn’t seem to be many signs of a slowdown around the corner.

“The North East and South East are the only regions where the average price of a prime monthly rental is lower year-on-year. According to Rightmove, demand per rental property is 162% above May 2019 levels, leading to fierce competition and more than a quarter of properties being let above the listing price.”

Meanwhile, as more evidence that tenants are finding the current environment extremely tough, 15% of renters in an ONS Opinions and Lifestyle Survey said it was very difficult to pay their rent. This compares with 10% who said the same in November 2022.

Property investors still looking ahead

The current climate is undeniably uncertain, with some forecasters expecting the Bank of England to once again increase its base rate in August. While mortgage rates in recent days have begun to stabilise again, it is impossible to know how lenders will react in the coming weeks and months.

For property investors, though, and particularly those who have been in the market for a long time or have multiple properties, focusing on medium and long-term investment prospects remains a key strategy.

Stevenson points out: “The rental sector remains strong as a medium-to-long-term investment, with more than one in four landlords with over five properties planning to expand their portfolio over the next year. According to the Royal Institution of Chartered Surveyors, rental growth of 6% per annum is predicted over the next five years.”

Meanwhile, she also acknowledges that the supply of properties to rent doesn’t look like it will significantly improve in the short term. However, she believes a slowdown in the sales market “may help”.

“Fewer landlord sales and owners renting out homes as they wait for any price falls to pass could marginally boost rental stock,” she says. “Although a steady stream of landlords are indeed leaving the sector, Zoopla report that this has been the case since 2018, and the trend is not accelerating.”

BuyAssociation specialises in connecting property investors with the most up-and-coming property investment opportunities across the UK, with a focus on off-plan investing. Get in touch for more information.

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