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Booming buy-to-let returns hit £112 billion

Booming buy-to-let returns hit £112 billion

Category: Buy To Let

Updated: 29/05/2015
First Published: 29/05/2015

This article was correct at the time of publication. It is now over 6 months old so the content may be out of date.

If you've ever considered becoming a landlord, then now may be the time to take the plunge. Our own research recently revealed that cheap buy-to-let mortgage deals are on the rise, and now a new report has revealed that British landlords have seen returns of £112 billion in the last year as growth in the private rented sector continues at considerable pace.

Enticing returns

According to the latest edition of Kent Reliance's Buy To Let Britain report, by the end of March, the average property generated return of £24,221 in rental income and capital gains.

This is equivalent to a 12.5% annual return, and is just £1,000 less than the average salary over the past 12 months.

Across Great Britain as a whole, annual returns seen by property investors totalled £111.5 billion, up £5.8 billion on the previous year.

The numbers are eye-watering and if you're thinking of grabbing a piece of the buy-to-let pie, it seems there is little time to waste.

The report suggests the sector grew by nearly 150,000 households in the year to March, with rented accommodation accounting for over three-quarters (77.4%) of new households created during the year.

Based on present trends, Kent Reliance says the sector could increase from 4.8 million households in Great Britain to 5.5 million by 2020.

Tenant demand strengthens

"Landlords are seeing the benefit of a structural change in Britain's housing market, with tenant demand ever strengthening," said Andy Golding, chief executive of OneSavings Bank, which trades under the Kent Reliance and InterBay brands in buy-to-let.

"Yes, house prices are showing signs of steadying somewhat, but growth remains brisk. Long-term price inflation is not in danger, given the gaping chasm between growing demand for housing and the number of houses being built each year.

"Combined with the dearth of high-LTV lending to first-time buyers, this will continue to buoy demand for rental accommodation, as well as landlords' returns, and the sector will continue to expand."

In separate research from Mortgages for Business, 65% of landlords said they are now planning to add to their portfolios over the next six months, up from 55% in November last year.

"Landlords are better capitalised and now more confident about reinvesting," said David Whittaker, managing director at Mortgages for Business.

"A strong rental market is being driven by tenants moving to make the most of job opportunities, and [they are] now gradually starting to earn more, too. That new surge of demand is putting more upwards pressure on rents, and landlords are only just beginning to supply more homes to let in response.

"On top of this, after the surprise stability of a majority Government, landlords will almost certainly see a short-term boost of house price growth, while the threat of damaging regulation has been lifted for at least the next five years."

What next?

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Disclaimer: Information is correct as of the date of publication (shown at the top of this article). Any products featured may be withdrawn by their provider or changed at any time.