£223.7 billion. That’s how much better off UK landlords are than five years ago when you do the maths on the overall capital appreciation of rented housing stock over the past five years.
The reason that I highlight this is because in recent years my landlord friends have had a hard time (I’m a landlord too by the way).
Falling yields and increased regulation plus an additional tax burden, have all weighed heavily on a sector that, after all, underpins the government’s woeful lack of social housing provision. And yet successive Chancellors seem to thumb their nose at us as if we are a blight, not the huge support that in fact we are.
Since 2016 UK rental yields have fallen from 4.1 to 3.6 per cent with typical monthly rents barely higher now than then at (Source: ONS).
But despite the headwinds that us enterprising property investors have faced of late, I can argue that the near quarter of a trillion pounds that property values have increased by in just half a decade, might just be seen as adequate mitigation for those that otherwise feel somewhat disadvantaged by the sector.
Perhaps surprisingly given its lacklustre performance during the pandemic compared to other regions, Greater London landlords have fared ok. Yields in the capital have fallen from 4.4 to 4.0 per cent in the last five years, sure.
But property values themselves here are still up by an average of £23,000 in the same period and, in my view, set to take off strongly having been overtaken by the regions for rather too long.
This, because agents have hardly seen an overseas buyer since 2019 and typically such purchasers make up around 29 per cent of London’s property transactions and so it doesn’t take much working out that nearly a third of demand has been missing for a while. When they return, prices are sure to correct upwards – especially as agency stocks remain woefully low.
Our London offices are seeing strong demand from renters again. Frankly, rental demand is never going to wane inside the M25, is it?
With all of the rhetoric around levelling up, London and the South East will always drive Britain’s economy and historically the capital alone accounts for over one quarter of our national GDP. This then dictates demand and jobs and therefore a sustainable appetite for housing especially amongst the upwardly mobile young.
The likely implementation of HS2, Newcastle being boosted with Saudi cash and so on, won’t change London’s dominance versus elsewhere and therefore its attraction as an investment target for property buyers domestically and internationally is set to remain, you can be sure of that.
It’s no coincidence that the clever, new, institutional build-to-rent money is heavily weighted toward London still. Some 43 per cent of it to be exact, according to the British Property Federation.
Of course, you do have other places that you might put your money. The FTSE 100 for instance.
However, in the five-year period in question the top 100 UK companies grew in value by just 2.0 per cent. Not much of an investment return, particularly with inflation bubbling as it is.
My point is this. Landlords have had it tough and have been squeezed. But, I’ll whisper this quietly so that Rishi Sunak doesn’t hear, we’re still doing rather well I reckon.
Marc von Grundherr is a buy-to-let landlord and is Director at Benham and Reeves, the 18 branch London estate and lettings agency.
