Buy to Let

Buy-to-let holds steady in second quarter of 2016

Christina Hoghton
Written By:
Christina Hoghton

Tenant demand and rent levels have plateaued, although they remain robust

The buy-to-let market is stable, with tenant demand for private rental property plateauing across the UK, according to research from lender BM Solutions.

It said that 45% of landlords reported no change in demand for privately rented property during the second quarter of 2016.

However, landlords in central London saw a drop in tenant demand, the only region in the UK to do so, while a quarter of landlords across the UK have seen demand rise.

Landlords cautious

Since last year’s Budget and Autumn Statement, when wide-reaching changes to the buy-to-let market were announced, landlord confidence has remained low.

Four in 10 landlords have increased rents across their portfolio over the past year by an average of 4%. However, some landlords have not managed to achieve rental rates advertised, while only 2% managed to rent their property out for a higher price than advertised.

Phil Rickards, head of BM Solutions, said: “The buy-to-let market has remained resilient following last year’s budget announcements, with landlord rental income and profitability still robust. Although we can see early signs of a plateau in tenant demand, levels are still high with many landlords seeing room to increase rents.

“Landlord confidence has been trending in a downward direction since the last Budget and Autumn statement, yet evidence is starting to show that this trend may have peaked as profitability remains strong and despite the perceived plateau in tenant demand, the early signs look toward a weathering of the challenges that the market faces.”

Rental yields have achieved relative stability, averaging 5.8% in the second quarter. Wales tops the chart with an average rental yield of 6.8% while central and outer London generated the lowest yields of 4.7% each.

In terms of rental income generated from the average portfolio, Scotland produced the highest gross rental income of £73,000 with the North West the lowest at £39,000.