Rental income for buy-to-let landlords has increased by a staggering 15% over the past 12 month to hit £18.7bn, up from £16.2bn in 2015-16, as rents continue to rise in response to all of the extra costs landlords have experienced over the last few years, new figures show.
With demand from tenants rising, at a time when the supply of much needed new private rental stock is dwindling, rents are seeing strong growth in some parts of the country, amid a shortage of properties.
The supply-demand imbalance has helped to ensure that buy-to-let properties remain one of the highest yielding mainstream investments in this country, according to HMRC data analysed by ludlowthompson.
The figures reveal that total rental income has increased by 55% in the last five tax years. By contrast income from savings and cash ISAs have continued to be low due to low interest rates.
The London-based estate agent says that the data confirms that buy-to-let property remains a relatively low-risk investment that outperforms other asset classes over the long-term, including government bonds, cash ISAs and shares.
ludlowthompson adds that buy-to-let landlords are also benefiting from downward pressure on interest rates on mortgages when adding to their portfolio as a result of continued competition between banks for mortgage business.
Stephen Ludlow, chairman at ludlowthompson, said: “Buy-to-let property is now a key part of individuals’ investment portfolios and retirement income.
“Residential property not only offers investors a stable, regular monthly income, but also offers long-term capital growth. While house prices are not a one-way bet, property has historically been far less volatile than other asset classes, such as shares.
“The fundamental supply-demand imbalance remains with the pool of potential tenants getting larger each year. This is still the case in London, despite Brexit jitters.
“Some of the increase in rental income will also be from rental growth, which means that rents are largely growing with inflation. Additionally, wage inflation has been growing steadily already over the past few months, and, historically, rental increases track wage increases. Ultimately, these figures highlight the real term growth in returns – the fundamental point behind any sound investment.”