Nubricks Blog - Why investing in residential property is more lucrative than ever

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02 Jun 2016

Why investing in residential property is more lucrative than ever

Landlords can take advantage of price rises and the fact this prices tenants out of the market to invest in properties

Investing in residential rental properties has become a more lucrative game than ever before, with data showing that landlords operating in this sector are enjoying some of the very best conditions they have ever seen, with other market factors playing into their hands and pushing demand, and returns higher than ever before.

The rise of generation rent, the pricing out of the market of potential homeowners and the subsequent higher rental prices that these factors bring have meant landlords being able to secure some of the highest levels of income ever recorded. It means that investing in rental properties is more lucrative than it has ever been, but just why is this the case and what factors have made residential investment such a golden egg in 2016?

Can't buy, won't buy

In recent years, the growth of 'generation rent' has often been spoken about, with a growing number of younger people in the UK choosing to rent rather than buy thanks to the increased freedom and convenience it affords them. This has meant that a third of the UK now rents rather than buying properties, with more than 4.5 million tenancies in place across the country.

But it's not just those who choose to live in rental homes that have made the market such an attractive prospect for landlords. Especially when it comes to young people, the simple reality is that many cannot afford to buy, and this has made it a better idea than ever before to get into a rental market that is providing somewhere affordable, attractive, modern and functional for those who cannot afford to buy.

According to figures recently released by the Halifax, the last 20 years have seen some fascinating spikes in nationwide house prices. For example, the average Londoner would now have to pay as much as 432 per cent more for their home than they would in 1996. Similar trends are in evidence across the rest of the country as well, with the average home having leapt by 251 per cent in the same period.

This has turned many away from buying their own home, with an increasing number instead choosing to live in quality rented accommodation instead of lowering their standards just to get on the property ladder.

Rental prices

The main reason for rental property having become such a lucrative investment option in recent times has been the fact that rental prices have been pushed higher and higher, increasing returns along the way. And even as it becomes a more mainstream and busier asset market, the same has remained true even into 2016.

According to the most recent HomeLet rental index, the average price of renting a home in the UK has climbed substantially in the past year, climbing by 5.1 per cent in the space of just 12 months. This sort of rise means landlords, even when paying more for their properties when rental assets have become more highly sought after, are able to achieve a continued high level of return, averaging between seven and eight per cent.

What's clear at the moment in the UK residential market is that rentals are here to stay. Through a combination of people not being able to get themselves on the housing ladder and simply choosing to rent because they prefer it, demand is sustained, allowing landlords who invest in the sector to continue to see higher returns, even as competition in the market becomes greater than ever.

This article has been provided by Experience Invest.
Category: Blog

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