Property investors are often keen to hone in on locations with particularly high tenant demand, and the latest data shows strong tenant appetite is widespread in the UK.
It has been widely reported over the past couple of years that tenant demand in the private rented sector is surpassing the supply of homes available across many parts of the country. While this puts additional pressure on tenants, it can also be a marker for landlords when looking at their next investment location.
Finding an area with high demand is a common strategy to achieve success in the buy-to-let market. Many landlords will focus their attentions on well-connected locations close to places of work or study, for example, or areas with excellent amenities, as these are things that can keep tenant demand consistently high.
Property type is important, too, as what you choose will depend on your target tenant, as well as your investment goals. For example, houses in multiple occupation (HMOs) are proving extremely popular among young professionals when they’re located in areas that might otherwise be too expensive for tenants to afford.
How high is tenant demand in the UK?
In the latest research from Finbri, it was revealed that 71% of UK landlords had experienced either a significant increase or an increase in demand for their rental properties in the year to March 2024.
This might mean that these landlords have received particularly high volumes of interest from tenants when they have listed their properties on the market. Where this happens, the landlord has more choice to ensure they choose a tenant who is the best fit for the property advertised.
Unfortunately, there has been a decrease in the number of rental homes available in the UK over the past 18 months, which has pushed up competition among renters. At the same time, research has shown that more tenants are staying put in their rental properties for longer as a result of the shortage and rising rents.
In the same survey, a quarter of landlords said they had not seen any change in tenant demand, while only 2% had less demand, and this could be down to a number of factors – including location and the specifics of the property on offer.
Strong rental yields for landlords
When tenant demand is high, this can have the knock-on effect of boosting rental yields. It can mean shorter void periods, as there are plenty of tenants lined up to move into a property as soon as it becomes vacant. This is particularly the case for HMOs, where each tenant tends to move in and out separately.
According to Finbri’s survey, 61% of landlords said they had experienced a significant increase or an increase in rental yields in the 12 months to March 2024, while around a third (32%) said they had not seen a change.
This could be down to several factors, with rising rents certainly being one of them – rents have climbed in double-digit figures for most of the country until very recently. To work out rental yield, the landlord takes the annual rental income of a property and divides it by its value, with the majority of buy-to-lets bringing in around 5-8%.
However, recent research by Lomond honed in on the top-performing postcodes in the UK for rental yields at the moment, demonstrating that location plays a huge role. The top five locations – Leeds, Bradford, Manchester, Nottingham, Sunderland – all had average yields of more than 10%.
As well as taking into account the potential of high tenant demand in your investment location, looking at average yields as well as projected capital appreciation are all factors that can impact the overall success of your investment.
Get in touch with BuyAssociation today if you’re looking for your next property investment opportunity in some of the UK’s top-performing locations.
