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Confidence in buy-to-let business continues to grow among brokers

In Q2 2021, the proportion of brokers forecasting a rise in buy-to-let mortgage business over the next 12 months has increased.

Despite the tapering of the stamp duty holiday, a survey by Paragon reveals 53% of mortgage brokers expect buy-to-let business to increase over the next year. This is compared to 50% in the first quarter of 2021. At the same time, the proportion of brokers forecasting declining levels of business stayed consistent at 10%.

Moray Hulme says: “These figures suggest that the strong levels of buy-to-let business witnessed over the last six to nine months wasn’t just as a result of the Stamp Duty stimulus, but down to more fundamental shifts in where and how people want to live.”

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Buy-to-let demand is high

During the second quarter of 2021, brokers reported that demand for buy-to-let was high. Specifically, 42% of intermediaries said demand was “strong”. And 8% stated demand was “very strong”. In the second quarter of 2020, which was at the height of the pandemic, there were only 26% who felt this way.

Additionally, only 10% of those surveyed reported buy-to-let demand to be weak. That is compared to 30% during the corresponding quarter last year.

Overall, the confidence among brokers is generally high. In the survey, 91% said they were confident about the outlook for their business over the next year. This was especially prevalent for those seeing high levels of buy-to-let business with 97% among that cohort.

“There has certainly been a growth in tenant demand for family homes, for example, and landlords are reacting accordingly.”

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Investing in buy-to-let

With demand in the private rented sector at high levels across the UK, this is providing a boost to the buy-to-let sector. Recently, many landlords have seen a drop in void periods and higher yields.

Additionally, the number of buy-to-let mortgages reached the highest level since March 2020. Investors and landlords have been welcoming the additional choice. With the increased competition, interest rates are still historically low.

Many landlords are locking in competitive mortgage deals. This is leading more buy-to-let investors to expand their property portfolio. Additionally, this year, more first-time landlords have even entered the buy-to-let sector due to the enticing market conditions.

By Kaylene Isherwood

Source: Buy Association

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Broker buy-to-let confidence continues to increase

Some 53% of mortgage intermediaries expect to see an increase in buy-to-let business over the next 12 months despite the tapering of the stamp duty holiday, according to research from , Paragon Bank.

This figure, which covers the second quarter of 2021, compares to 50% in the first quarter of the year, whilst the proportion expecting declining levels of buy-to-let business remained consistent at 10%.

Moray Hulme said: “These figures suggest that the strong levels of buy-to-let business witnessed over the last six to nine months wasn’t just as a result of the Stamp Duty stimulus, but down to more fundamental shifts in where and how people want to live.

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“We still expect to see business levels moderate as the stamp duty holiday ends but landlords are seeing plenty of opportunities to expand their portfolios to meet excellent levels of tenant demand and changes in the type of property people now want to rent.

“There has certainly been a growth in tenant demand for family homes, for example, and landlords are reacting accordingly.”

Brokers also reported that demand for buy-to-let was strong during the quarter itself, with 42% of intermediaries stating demand was ‘strong’ and 8% ‘very strong’.

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That compares to 26% in the corresponding period last year at the height of the pandemic.

Just 10% of respondents reported buy-to-let demand as weak during the period, compared with 30% during the second quarter of 2020.

Moray Hulme added: “Mortgage brokers have experienced a busy 12 months after the initial panic of the coronavirus pandemic.

“They enter the second half of 2021 in a confident, robust mood, which is indicative of the underlying demand for mortgage products.”

Source: Mortgage Introducer

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Energy efficiency has become a top priority for buy-to-let investors

When making investment decisions, many buy-to-let investors are considering green credentials of properties, alongside rental yields and opportunity for capital growth.

New research by Hodge reveals buy-to-let investors are starting to put more importance on the energy efficiency of properties. In a survey of landlords, investors and brokers, 82% of respondents said environmental friendliness and energy efficiency were a top consideration when purchasing properties.

Green credentials even made it in the top three considerations when making decisions on property investments, along with the opportunity for capital growth and rental yields. Hodge also pointed out that other recent research is indicating that people are prioritising living more sustainable lives.

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A Savills report revealed 26% of people consider the environment the most important issue facing the country. Additionally, research by Opinium showed 78% of the public feel they have a personal responsibility to deal with the climate crisis. Many of the people included in this research will be renters, showing the need for more eco-friendly properties.

Property priorities are changing

To stay competitive, buy-to-let investors need to adapt to these tenant preferences and the changing market. Investors, along with property developers, will need to provide more choice in sustainable housing options moving forward. And it’s positive to see investors are already prioritising green credentials.

Andy Button, head of investment finance at Hodge, says: “The buy-to-let market is particularly buoyant right now with demand continuing to grow throughout the pandemic, and it’s interesting to see how the priorities for landlords are changing when looking to add to their portfolio.

New-builds in high demand

The government has a target to reduce greenhouse gas emissions to net zero by 2050. Improving the energy efficiency of housing will play an important part in achieving this. There is even talk that the government could further increase minimum EPC ratings for properties in the private rented sector in the coming years. Currently, all privately rented properties need to achieve a grade E or higher.

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With the latest environmental standards, new-builds are greener properties. The majority of new-build properties have an A or B EPC rating. Higher green standards are even being introduced. This will further lower energy consumption and reduce bills for occupiers.

New-builds are more appealing to tenants compared to old, tired properties. The high environmental standards and lower bills provide benefits to tenants. This makes energy efficient new-builds ideal for buy-to-let investment. Because of this, good quality new-builds are becoming increasingly sought after.

Andy adds: “It’s clear that sustainability will feature more and more in new build development design, and more stringent compliance to EPC, and an investment strategy more closely aligned to sustainability could actually improve cash flows in the longer term, as tenants might be prepared to pay higher rents, in exchange for lower utility costs.

By Kaylene Isherwood

Source: Buy Association

Source: Mortgage Introducer

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Portfolio landlords prefer to trust brokers to find the best loan

The majority (73%) of buy-to-let (BTL) landlords prefer to access finance through a broker, rather than going directly to lenders, according to Hodge research.

The research, which asked portfolio BTL landlords and brokers for their views, also found that 71% of larger investors (with portfolios of between £2m and £50m) specified that a broker had saved them money by getting them a good deal.

In addition, 40% of BTL landlords said they found researching a suitable mortgage product themselves to be frustrating, with annoyances including interest rates (35%), lack of clarity over charges (35%), and mortgage or loan underwriting (31%).

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Mike Clifford, head of commercial propositions at Hodge, said: “Our research shows borrowers clearly value the support of a broker to find them the best deal and trust them to find a lender that suits their needs.

“With so many borrowers putting their trust in brokers to find them a loan that suits them, brokers are seen as a key link between lenders and investors – with the added benefit of removing frustrations for landlords.

“The residential market is still very buoyant and many buy-to-let landlords are on the look-out for new properties to add to their portfolio.

“When it comes to lenders they want flexibility, speed and efficiency, something we strive to achieve here at Hodge.

“Hodge has a small, specialist residential investment team who aim to provide a bespoke and flexible service to both brokers and investors.

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“Getting to know our customers, listening to their feedback and keeping them in the loop when it comes to criteria changes and product enhancements allows us offer greater flexibility and match the right product to the right investor.

“The Hodge portfolio buy-to-let loan allows landlords to control their assets under one loan, with the flexibility to remove and add properties, ensuring a far more streamlined, flexible product, which, according to our research, is just want landlords – and brokers – are looking for.”

By Jake Carter

Source: Mortgage Introducer

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Plenty of choice for landlords as buy-to-let options increase

Buy-to-let product choice has increased whilst average two and five-year fixed rates have fallen, according to the latest analysis from Moneyfacts.co.uk.

New figures revealed the average two-year fixed rate was lower now than compared to 2019.

Meanwhile, the beginning of July saw the highest number of product options on offer in the buy-to-let space.

The 2,709 deals on the market at the start of this month represented a 971 leap on this time last year when availability was limited following the product withdrawals which took place during the pandemic.

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Moneyfacts said, landlords with 40% equity or deposit would find, even though their level of product choice was lower than this time last year, they were amongst those who might be able to secure a competitive new deal as the average two and five-year fixed rates in this bracket both remained 0.03% lower year-on-year.

Eleanor Williams, finance expert at Moneyfacts.co.uk, said there were also 365 deals more available now than were recorded in July 2019, demonstrating the strength and resilience of the sector in the aftermath of an unprecedented 18 months.

“The demand for buy-to-let could well remain strong in the months to come as rental demand is prevalent, indicated by recent research from Propertymark’s Private Rented Sector report, May saw a record-breaking number of new prospective tenants registered,” she added.

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“Whether now is the right time to invest in property may also come down to the desire to earn a decent income.

“Indeed, research from Nottingham Building Society revealed that 61% of landlords surveyed felt property was a better investment due to low interest rates for savings – and this coupled with high demand for rental accommodation could sway new investors to dive into the buy-to-let sector.”

Williams also explained, due to the influence of the pandemic, interest rates for buy-to-let had climbed year-on-year with the overall two and five-year average interest rates of 2.98% and 3.28% being 0.37% and 0.31% higher respectively than a year ago.

This, she said, may be linked to the increase in availability of higher loan-to-value products.

She added: “These higher LTV deals usually charge a higher rate and can therefore impact these averages. However, despite creeping up a further 0.02% month-on-month, what is positive is the fact that the overall two-year fixed rate is lower now than in June 2019 – which means those coming off a two-year fixed deal may still find a better deal, depending on how much they have in equity and their circumstances.

“There could still be some understandable hesitation from prospective landlords with some existing investors who could even be considering downsizing their portfolio depending on the pandemic’s impact. However, we are beginning to see some improvements in average rates in certain loan-to-value brackets on a month-on-month basis.

“As house prices rise, demand for rental accommodation is high, and savings rates remain poor, therefore, investing in property could be enticing to some. It is vital though that would-be landlords and those looking to change their deal seek advice to ensure it’s the right time for them and they find the best package for their circumstances and plans.”

Buy-to-let mortgage market analysis 
Product numbersJul-19Jul-20Jun-21Jul-21 
BTL product count – fixed and variable rates2,3441,7382,4862,709 
All 80% LTV BTL products – fixed and variable rates21277147198 
All 75% LTV BTL products – fixed and variable rates971616884952 
All 60% LTV BTL products – fixed and variable rates342414341340 
Average ratesJul-19Jul-20Jun-21Jul-21 
BTL two-year fixed – all LTVs3.01%2.61%2.96%2.98% 
BTL two-year fixed – 80% LTV3.75%3.18%4.20%3.94% 
BTL two-year fixed – 75% LTV3.02%2.72%3.01%3.01% 
BTL two-year fixed – 60% LTV2.07%2.28%2.28%2.25% 
BTL five-year fixed – all LTVs3.50%2.97%3.31%3.28% 
BTL five-year fixed – 80% LTV4.14%3.82%4.34%4.15% 
BTL five-year fixed – 75% LTV3.51%3.14%3.42%3.36% 
BTL five-year fixed – 60% LTV2.51%2.65%2.64%2.62% 
Data shown is as at first working day of month, unless otherwise stated.  Source: Moneyfacts.co.uk

Source: Mortgage Finance Gazette

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Buy-to-let landlords rate energy efficiency of properties as top priority

The green credentials of prospective properties have been rated among the top consideration for portfolio buy-to-let landlords, a survey by Hodge has found.

The bank discovered environmental friendliness and energy efficiency were up there with rental yield and opportunity for capital growth as the top investment priorities when it quizzed landlords, investors and brokers.

Indeed, it was important for 82% of respondents demonstrating how influential green credentials were for landlords today.

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Andy Button, head of investment finance at Hodge, said: “The buy-to-let market is particularly buoyant right now with demand continuing to grow throughout the pandemic, and it’s interesting to see how the priorities for landlords are changing when looking to add to their portfolio.

“While rental yield and potential for capital growth are, of course, top priorities our research reflects a change in mood of the market, where sustainability and green credentials are becoming ever more important.”

“According to a recent Savills report, 26% of people considered the environment the most important issue facing the country and, according to Opinium research, 78% of the public believe they have a personal responsibility to deal with the climate crisis – many of these people will be renters.

“Therefore, to stay competitive landlords can’t ignore tenant preference; they, along with developers and estate agents, are having to provide choice in sustainable housing options.”

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Button added: “It’s clear that sustainability will feature more and more in new build development design, and more stringent compliance to EPC, and an investment strategy more closely aligned to sustainability could actually improve cash flows in the longer term, as tenants might be prepared to pay higher rents, in exchange for lower utility costs.

“Our research suggests that investors are very much alive to the longer term benefits that having sustainability credentials in a portfolio can afford.”

Hodge’s PBTL product has been developed for buy to let landlords with four or more properties, who want to stay organised with one loan to cover them all. It offers mortgages of up to £5 million for between four and 15 properties and will also loan to those buying multi-unit blocks.

The lender also offers a Specialised Residential Investment loan, up to £10 million, for larger investors with over 15 properties/units, and includes specialist property types, like multi-unit blocks and Houses of Multiple Occupancy.

Source: Mortgage Finance Gazette

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London’s Rental Market Heats up According to Chestertons

London’s rental market is witnessing a strong recovery in spite of the pandemic, according to Chestertons’ latest analysis. Comparing May to April, the agency’s 31 branches across London confirmed a cumulative 17 per cent increase in new tenant registrations and 10% increase in agreed lettings.

Whilst demand is up, the number of properties available to rent at the end of May 2021 was down, with Chestertons registering a 3 per cent reduction in supply compared to end of April 2021 and a staggering 24 per cent reduction compared to May 2020. With demand outstripping supply, fewer landlords are now willing to drop their rents which is a stark contrast to this time last year when high numbers of London landlords dropped their rents by up to 20 per cent.

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In fact, Chestertons confirms that in many London postcodes, rents increased in May vs April. Some of the areas that have seen the biggest rental increase are Barnes (+17 per cent), Wandsworth (+15 per cent), Mayfair (+23 per cent), Westminster (+18 per cent) and South Kensington (+12 per cent).

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Richard Davies, Head of Lettings at Chestertons, says: “The majority of tenants registering with us now see their return to the office as imminent; whether that’s full or part-time. With that in mind, and with rents at the lowest level they have been in years, tenants are rushing to snap up a London rental property at a reduced cost. At the same time, as lockdown restrictions are easing and travel becomes possible again, we are also seeing the return of overseas student demand. With the continuous increase of tenants wanting to move back to London, we expect London’s rental market to become increasingly competitive over the next few months; particularly during the summer, which has always been a key season for tenants to move.”

BY PETE CARVILL

Source: Property Wire

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The Best Property Rental Yields in the UK

The latest research by nationwide Build-to-Let specialist, Sequre Property Investment, has revealed which major cities across England and Wales have seen rental yields stand the test of recent times, despite the government’s attempts to dampen investor appetite through a number of legislative changes.

With changes to buy-to-let tax relief, an increase in the rate of stamp duty on buy-to-let and second homes, and more recently, talk of changes to capital gains tax, you could be forgiven for thinking the government wants to deter investment into the rental sector.

However, the sector continues to prove a lucrative one for those investing in the right areas, and Sequre Property Investment’s analysis found that seven cities, in particular, have performed very strongly in recent years.

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Sequre Property Investment analysed the average rental yield across 21 major cities in England and Wales over the last five years and found that across the nation, rental yields have averaged 5.1 per cent per year since 2015.

The best performing has been Manchester, with rental yields sitting at an average of 5.5 per cent a year.

Sunderland has also performed well at an average of 5.4 per cent per year, with Nottingham (5.3 per cent) and Newcastle (5.2 per cent) also putting in a strong performance.

Cambridge has seen the lowest average rental yield since 2015 at just 3.2 per cent, while Bournemouth is the only other city to also slip below the 4 per cent mark.

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Daniel Jackson, sales director at Sequre Property Investment, said: “The increasing cost of property coupled with current uncertainty within the rental market can make investing into the rental market a daunting business. However, it remains a lucrative venture for those who know where to invest and what to invest in. The key is to know your market and to appreciate that property investment should be undertaken with a long term view, rather than a smash and grab mentality. The historic market health of a given location can provide you with good insight in this respect but top-line rental yields can only take you so far. Utilising the knowledge of those in the sector is the best way to maximise your endeavours, whether it be through a tailored investment to suit your individual circumstances, the ability to access bulk deals that can minimise the initial cost of investing or even access to off-market opportunities that aren’t open to the average buy-to-let investor. All of these approaches can see you secure a far higher yield in any location when compared to the general market.”

BY PETE CARVILL

Source: Property Wire

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Average UK rent jumped 4% in the last year – HomeLet

The average UK rent jumped 4 per cent in the last year, according to statistics just released by Homelet, and now stands at £997 per month.

The company also found that every region apart from London saw an increase in recent prices year on year. Within the capital, rents dropped by 0.9 per cent. Meanwhile, the average price across the country is up by 6.4 per cent year on year, now reaching an average of £864 per month.

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Andy Halstead, chief executive officer of HomeLet, said: “We’ve seen from sharp house price spikes across the country that the Coronavirus pandemic changed what Britons are looking for in a property. Many said to be looking for properties offering more living space; for those working from home as an example, that’s also the case in the private rented sector. Rental properties continue to play a crucial role in meeting the demands of people up and down the country, and the flexibility and responsiveness shown by the private rental sector will be vital in the coming months as the country opens up again. As rents increase, we’ve also seen an increase of over 10 per cent in suspicious and fraudulent applications for let property; with backlogs and delays in processing evictions, the demand for high-quality tenant reference and insurances has never been higher.”

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He added: “The overwhelming success of the vaccination drive brings hope that returning to some form of normality could be on the horizon. However, we would still caution that millions could be made unemployed at the end of the furlough scheme – posing considerable problems in tandem with an unbalanced rental market. Whilst the Government looks to stimulate homeownership, the importance of the private rented sector can’t be understated and should not be overlooked.”

BY PETE CARVILL

Source: Property Wire

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The Best Areas in London for Buy-to-Let Yields This Year

Buy to Let – Since the onset of COVID-19, investors have turned away from many of the asset classes whose presumed security and capacity for long-term value creation were once thought unimpeachable. With international lockdowns accelerating existing trends towards flexible working practices and e-commerce, investors have seen billions wiped off the value of commercial property assets.

However, while commercial property has suffered, the value of residential assets has fared well during the pandemic. Thanks to the extended stamp duty holiday, the sales market is buoyant and price growth has exceeded expectations, while a surprisingly robust lettings market benefited from permission to continue operating during later lockdowns and a flurry of activity as renters seek out housing that more closely aligns with their post-COVID priorities.

At Home Made, we have analysed data from thousands of property listings across London to create an up-to-date guide on buy-to-let rental yields for investors in the capital. Here are the top 10 postcodes in London offering investors the best rental yields for 1, 2, and 3-bedroom properties.

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1-bedroom properties

  1. IG11 (Barking, Upney) – 6.12 per cent
  2. N9 (Lower Edmonton) – 5.89 per cent
  3. TW13 (Feltham, Twickenham) – 5.65 per cent
  4. EN8 (Cheshunt, Waltham Cross) – 5.57 per cent
  5. IG1 (Ilford) – 5.56 per cent
  6. EN3 (Enfield) – 5.50 per cent
  7. RM6 (Chadwell Heath, Goodmayes, Marks Gate, Little Heath) – 5.46 per cent
  8. RM1 (Romford) – 5.43 per cent
  9. RM7 (Romford, Dagenham, Hornchurch) – 5.39 per cent
  10. IG2 (Gants Hill, Newbury Park, Aldborough Hatch) – 5.35 per cent

2-bedroom properties

  1. UB1 (Southall) – 5.93 per cent
  2. IG11 (Barking, Upney) – 5.64 per cent
  3. EN3 (Enfield) – 5.52 per cent
  4. RM6 (Chadwell Heath, Goodmayes, Marks Gate, Little Heath) – 5.48 per cent
  5. N9 (Lower Edmonton) – 5.42 per cent
  6. TW5 (Hounslow) – 5.39 per cent
  7. N18 (Upper Edmonton) – 5.39 per cent
  8. IG1 (Ilford) – 5.37 per cent
  9. IG3 (Ilford, Cransbrook, Loxford) – 5.35 per cent
  10. RM1 (Romford) – 5.33 per cent

3-bedroom properties

  1. RM8 (Dagenham, Beacontree) – 5.13 per cent
  2. RM9 (Dagenham, Beacontree) – 5.01 per cent
  3. RM10 (Dagenham, Beacontree) – 4.90 per cent
  4. IG11 (Barking, Upney) – 4.80 per cent
  5. EN3 (Enfield) – 4.76 per cent
  6. RM3 (Harold Wood, Harold Hill) – 4.64 per cent
  7. N9 (Lower Edmonton) – 4.61 per cent
  8. CR0 (Croydon) – 4.56 per cent
  9. N18 (Upper Edmonton) – 4.54 per cent
  10. CR7 (Thornton Heath) – 4.54 per cent

Overall

  1. IG11 (Barking, Upney) – 5.13 per cent
  2. RM10 (Dagenham, Becontree) – 4.97 per cent
  3. RM9 (Dagenham, Becontree, Castle Green) – 4.94 per cent
  4. RM8 (Dagenham, Becontree, Becontree Heath, Chadwell Heath) – 4.91 per cent
  5. SE28 (Thamesmead, Greenwich, Bexley) – 4.88 per cent
  6. E13 (Plaistow, West Ham) – 4.59 per cent
  7. RM3 (Harold Wood, Harold Hill, Noak Hill, Harold Park) – 4.54 per cent
  8. N9 (Lower Edmonton) – 4.44 per cent
  9. E6 (East Ham, Beckton, Barking) – 4.40 per cent
  10. RM6 (Chadwell Heath, Marks Gate, Little Heath, Goodmayes) – 4.35 per cent

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What does the data show and why?

As the data indicates, the most attractive investment prospects right now are mainly clustered in London’s outermost Eastern boroughs: Barking and Dagenham, Redbridge, and Havering. A review of our previous yields analysis (published in late 2019) suggests that there has been a sustained eastwards shift in the location of postcodes offering the best potential ROI for buy-to-let landlords.

There are several likely reasons why this is the case, with trends established both before and during the pandemic responsible for the continuing eastwards shift.

Improvements to transport infrastructure

As was the case in our original 2019 analysis, improvements to London’s transport infrastructure mean that residents in high-yield areas can commute into the major economic hubs of the city centre with relative ease. The forthcoming Elizabeth line will drastically improve transport connections between many of this year’s best performing locations to the rest of the TfL network, with stations opening in Ilford, Goodmayes, Chadwell Heath, and Romford. We know that rental prices react more quickly than sales values to infrastructural improvements, so investors should expect to see an even greater spike in rental yield value in these East London suburbs.

The impact of urban redevelopment

Urban redevelopment schemes that introduce thousands of units of high-specification housing and modern amenities tend to change the profile of tenants, making them more attractive to working professionals on higher incomes. This increases the value of nearby property, leading to a sustained rise in rental yields over the medium term as rental price growth outpaces the growth in sales prices.

East London’s outer boroughs are currently further behind in their redevelopment journey than many of the more central neighbourhoods that have already been transformed by various urban renewal projects (e.g Stratford, Royal Docks). Ambitious redevelopment plans underway in the East, particularly in Havering, are set to have a similar impact, and investors should expect to see consistent growth in rental yields along with significant appreciation in the sales value of any property.

Consumer and renter behaviour

Tenant migration patterns have been altered significantly by COVID-19. Since the onset of the pandemic, the widespread adoption of flexible working practices has meant that renters have had more freedom to move across the city without as much concern for the impact on their daily commute. When we analysed enquiry data for rental properties in TfL travel zones 4, 5, and 6, we found that 40 per cent of the renters enquiring on properties in these areas were currently based in zones 1, 2, and 3, suggesting a significant spike in the number of tenants moving towards London’s suburbs. Similarly, 64 per cent of the renters logged in our database in 2020 were moving to a completely new area of the city, with an average travel time of 44 minutes between their previous property and prospective new home.

As well as having the flexibility to stray further away from the workplace, tenant priorities have changed drastically following our collective experiences of successive lockdowns. The so-called ‘race for space’ is well documented, with many tenants moving to the suburbs or leaving the city altogether in search of larger properties with more access to green space and better suited to pet ownership – features which are now a higher priority for many than proximity to the workplace.

Many have also moved further away from the centre to reduce costs during a period of sustained economic upheaval. For many of London’s working professionals, it no longer makes financial sense to pay a premium for expensive central property when there is no need to maintain a daily physical presence in the workplace. Properties in high-yield areas are able to satisfy both the post-COVID lifestyle priorities and affordability criteria of London’s renters.

Overall, the residential lettings market has proven remarkably adaptable when faced with unprecedented economic and social circumstances, along with various existing trends that disrupt the way people rent and let property. As a result, buy to let rental yields in outer zones have remained high, and even increased in the last 18 months, as renters expanded their search radius to include the new areas that they would now consider living in.

BY PETE CARVILL

Source: Property Wire

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