Interesting data is emerging as to where, how and why some landlords may be looking further afield or diversifying their portfolios to capitalise on shifting regional trends, stronger yields and tenant demand.
Your Move’s England and Wales Rental Tracker found that investor landlords in the Southern regions are looking North for higher returns, as properties in Northern areas continue to outstrip rival regions. In the North East the typical property returned a 5 per cent yield, while in the North West that figure was said to be 4.8 per cent. This contrasts with an average yield of just 3.2 per cent in London and 3.3 per cent in both the South East and South West.
Focusing on the more professional end of the landlord spectrum, data from Leeds Building Society revealed that landlords investing in houses in multiple occupation (HMOs) are continuing to benefit from the highest rental yields. It found that the typical rental yield for HMOs was 6.9 per cent, higher than the average rental yield of 5.8 per cent across all property types. Location is also highly relevant for landlords incorporating this property type into their portfolios, a cost factor also evident from a tenant perspective.
According to a recent room rental index from Ideal Flatmate, the cost of renting a room in the UK has risen by 11 per cent year-on-year. Unsurprisingly, London was reported to be the most expensive UK city in which to rent a room (£745), while this fell to £535 across the country. The second most expensive city was Glasgow at £588, followed by Bournemouth at £575, Cambridge at £562 and Leeds at £548. A breakdown of the figures showed that Leeds experienced the largest increase in single room costs both year-on-year and over the first quarter, up 32 per cent and 50 per cent respectively.
So, what can we learn from this data?
Location remains vital for landlords when looking to maximise yields on all types of property investment and rising demand could encourage more landlords to look beyond their ‘usual’ property catchment area and property type. This is especially apparent for professional landlords with larger portfolios, additional experience and a more robust structure in place to undertake sufficient due diligence and spread their exposure/risk. Although, as is always the case, landlords should continue making their property-based decisions on a transaction-to-transaction basis, taking into account their personal and financial circumstances, whilst receiving the most comprehensive professional advice possible.
