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House price rises mean buy to let remains top investment

Wednesday 01 June 2016

BTL properties are still outperforming almost all other types of investment recent figures have shown – despite a flurry of attacks on the sector by the Treasury.

Average returns of 9.6% were made by landlords in England and Wales by March 2016 – and 16.5% in London.

Although returns in the North are not as strong, figures from Property Partner Residential Market Index (PPRMI) show gains of 2.6% in the North East and 4.5% in Yorkshire and Humberside were offset by the cheaper property prices.

Experts say the larger part of these returns have been made by rising house prices, while the value of shares fell on the FTSE 100.

PPRMI estimate that the income from rents for London landlords was only 2.6% over the last 12 months – so the long-term profits are dictated by house prices rises.

And here – despite Treasury attacks like the hike in stamp duty – is where the good news really begins for BTL investors.

Estate agents eMoov calculate that the average price of a home in England by 2030 with be over £450,000.

Their predictions are based on the 84% rise in house prices between 2000 and 2015.

In Wales, prices are expected to reach £307,712 and in Scotland £297,222 – while the biggest winners will be in London where average property prices could cross the £1million mark.

Research from the Resolution Foundation reveals that house prices have gone up by 36% since April 2011 alone, far outpacing average weekly pay packets, which have only risen by 7%.

A clear side effect of the rise has been the growing numbers of people who are locked out of home-ownership – which has fed demand in the private rental market.

While rents may not yield the same returns as they have done historically, it does seem that the trend towards inflationary property prices will continue to fuel the BTL sector.

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