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Buy-to-let returns top all other asset classes

With savers receiving dismal returns from banks and building societies, thousands of people have unsurprising turned to residential property as a means of supplementing their income, supported by record-low mortgage borrowing rates, soaring demand from tenants and increasing rents, as buy-to-let consolidates itself as the investment of choice. 

Having long provided bumper double-digit returns for investors, investment in buy-to-let continues to outperform all major asset classes, and with population pressures expected to continue to drive demand, rental prices look set to rise further. 

The latest PPRMI buy-to-let index from Property Partner show that residential property continues to perform strongly as an asset class, with returns on buy-to-let properties continuing to outstrip those from investment in shares, bonds and cash. 

The index reveals that total returns - rental income and capital growth - from buy-to-let property in England and Wales have increased by an average of 9.6% over the past year, led by gains in London where buy-to-let landlords make a staggering total return of 16.5%, on average. 

Rob Weaver (pictured), Property Partner’s director of investment, said: “Total returns for residential property crept up to 9.6% in the year to March, as investors rushed to beat April’s stamp duty deadline.

Buy-to-let returns top all other asset classes

“This was especially true of London, where annual returns were in double digits, reaching an eye-watering 16.5%. The East was strong too, and from firsthand experience the Northern Powerhouse regeneration plan is boosting investment activity in the North West and in particular Manchester.

Monthly figures can be volatile, but what’s clear is that regional disparities in the housing market are widening, with Yorkshire and Humberside and the North East regions looking fragile, according to the Index. 

“Investors are understandably showing caution ahead of the EU referendum. But the fundamentals - high employment, wage growth, cheap borrowing and the chronic shortage of supply - remain in place and are positive,” Weaver added. 

Separate research conducted last year by economists at the Wriglesworth Consultancy for lender Landbay found that buy-to-let landlords have earned returns of up to 1,400% since 1996, significantly outstripping returns from other mainstream investments, such as shares, bonds and cash, research shows, and with the existing low supply of housing failing to satisfy high demand, initial signs are that this trend of growth will continue. 

The latest data from HomeLet shows that the average rent in Britain, excluding London, stood at £764 a month, up 5.1% year-on-year.

The study found that rents has increased in 11 of the 12 regions monitored in the UK on an annual basis over the three months to April 2016, with the North West of England being the only region where rents were lower than a year earlier, falling by 1% to £659 a month on average.

Buy-to-let returns top all other asset classes

“Rental price growth in most areas of the country is unchanged from the trends observed over almost three years,” said Martin Totty (pictured), chief executive of Barbon Insurance Group, HomeLet’s parent company.

Buy-to-let investors who want to know where they can find Britain’s highest rental yields (apparently) should click here.

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