Beat low savings rates by investing in property


Tuesday 23rd October 2012

buy-to-let re-mortgage applications reached a 2-year high in August

With savers receiving dismal returns from banks and building societies, a growing number of people are, unsurprisingly, turning to property as a means of supplementing their income.

While most saving rate accounts are currently offering well under 3% interest on your money, a recent PRS Trends Survey, commissioned by specialist buy-to-let mortgage lender Paragon Mortgages, found that UK landlords are achieving an average rental return of well in excess of 6%.

The research revealed that landlords achieved an average rental yield of 6.5% in the second quarter (Q2) of this year, up from 6.2% in the previous quarter (Q1), with professional landlords achieving a higher average rental return of 6.9% - an increase on 6.5% in Q1.

Yet with property prices broadly flat and strong tenant demand continuing to place upward pressure on rental values, some experts expect yields to increase even further.

Expanding buy-to-let market

Jones Lang LaSalle's (JLL) latest research on homeownership and the housing market shows that the Private Rented Sector in the UK has increased by 47.9% over last five years and is likely to grow further in the short to medium term.

Since 2006, the number of households renting privately increased by 47.9%, or 8.2% per annum. If this rate of growth continues, it will mean some 1.7million additional privately rented homes will be required by 2016 equating to an annual investment of circa £285billion - over eight times the size of the current buy-to-let market.

Rental values

The latest LSL Buy-to-Let Index shows that rents reached an all-time high of £734 per calendar month in England & Wales in July, with further growth anticipated.

A recent landlord sentiment survey conducted by LSL Property Services plc shows that four in ten landlords expect to see a further increase in rental values over the next year, with just one in a hundred investors expecting rents to fall.

Furthermore, 48% of landlords believe that now is a good time to invest in property, while less than 1% think it is now a good time to reduce their portfolios.

Landlords adding to property portfolios

With rents rising rapidly, many landlords are falling over themselves to add to their property portfolios, reflected by the fact that buy-to-let re-mortgage applications reached a two-year high in August, according to the figures published by haart.

Most landlords (62.1%) opted for fixed rate mortgages in August, while the number choosing discounted or tracker rates fell by 10% to 37.9%.

Until the banks ease stringent mortgage lending restrictions, many aspiring homeowners will not be able to afford to buy a home forcing them to live in rental accommodation instead, adding to existing demand for rental housing and placing even greater pressure the government to help housebuilders increase the supply of new homes to rent.

by Marc Da Silva

New Homes by Berkeley Homes

Ebury Square
NOW AVAILABLE from £1,950,000
In the heart of Belgravia, London's most prestigious village neighbourhood, lies Ebury Square - a development of one to five bed private residences,...
Montagu Gardens
NOW AVAILABLE from £1,145,000
In a leafy Surrey neighbourhood, less than an hour from Central London, Berkeley Homes presents an exclusive selection of impressive four and five-...
Bersted Park
NOW AVAILABLE from £215,000
The new homes at Bersted Park, West Sussex, are set within some of the South East's most stunning countryside. Here you'll find leafy woodland walks...
Vista, Chelsea Bridge
NOW AVAILABLE from £820,000
Introducing Vista, a brand new collection of luxurious 1, 2 and 3 bedroom apartments and penthouses boasting exemplar specification and unique...
NOW AVAILABLE from £750,000
Edenbrook in Fleet is a beautiful collection of contemporary 2,3,4 and 5 bedroom new homes. Set on the edge of a stunning 82 acre Country Park,...
NOW AVAILABLE from £525,000
Situated in charming Caterham on the Hill, Oakgrove is set within its own parkland, and combines the pleasures of both town and country life - all...
Roman House
NOW AVAILABLE from £4,250,000
Roman House represents a unique new opportunity; the chance to acquire a luxury apartment in the very heart of the City of London, undisputed leader...
Kingshill Meadow
NOW AVAILABLE from £450,000
Set in idyllic surroundings, deep in the heart of the Cotswolds countryside. Kingshill Meadow is a rare collection of stylish 3 & 4 bedroom homes...
NOW AVAILABLE from £316,950
An attractive collection of houses and apartments, situated adjacent to the peaceful Sevenoaks Wildlife Reserve in the rolling Kent countryside, yet...
Imperial Square
NOW AVAILABLE from £495,000
An exquisite collection of gated 2 and 3 bedroom apartments and 3 and 4 bedroom homes carefully designed to exude the finest of Berkeley quality...
Cambridge Riverside
NOW AVAILABLE from £1,560,000
Set on the picturesque banks of the River Cam, Cambridge Riverside is an award-winning development of luxurious apartments and townhouses. Close to...
The Avenue
NOW AVAILABLE from £695,000
Distinguished by its heritage architecture, choice of properties and landscaped setting rich in mature trees, The Avenue promises an exclusive...