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Countrywides latest quarterly letting index report that landlords are seeing an increasing return on their investment when factoring in property values.
The average total return for landlords is now 12.2%, when both the rental yield and capital appreciation are added together, compared to a figure of 6.8% a year ago.
This surge in fortune has largely been driven by the boom in property prices during the early part of this year, though recent RICS data points to a slowing market.
There continues to be regional variations, London's rental yields are low, but prices rises are continuing to out perform all other areas. The average London landlord had seen three quarters of their total return produced by capital growth, with just a quarter coming from rent payments.
Countrywide's rental data show the average UK monthly rent has increased 4.6% over the past year, largely again driven by booming London, whereas much of Northern England, particularly the North East is seeing falls in average rent. Some larger city centres are fairing better,Birmingham (+3.9%), Manchester (+3.7%) and Leeds (+3.6%).
Nick Dunning, Group Commercial Director, Countrywide plc, said:
“Yield and prospects for capital growth are both important components of a rental property investment. When weighing up an opportunity would-be landlords need to balance both the achievable yield and the prospects for capital appreciation before striking a balance between the two. For landlords looking to invest over the medium to longer term the prospects for capital appreciation becomes increasingly important.
“Since 2013, capital growth has formed a growing part of the return for landlords across London and the South East of the UK. Although rents, alongside wages have grown strongly, they have lagged behind rising house prices. While inevitably this has led to a degree of yield erosion, when looking at yield and capital appreciation together, the total returns have increased by 45% over the past 12 months. Conversely, parts of Northern England and Wales have seen yields grow as house prices have recovered much more slowly. In 2013, rising rents outstripped house price growth across most of the North.
“While total return forms the bottom line for landlords, landlords also need to take into account other practical considerations to ensure this return is realised. For instance, many landlords with smaller portfolios choose to purchase near to their own home in order to be able to manage or keep an eye on their property investment. Equally, for landlords looking to invest over a relatively short period of time, the ability to sell quickly is important to minimise void periods during the sale process and to realise value growth.
Nick Dunning, Group Commercial Director, Countrywide plc, said:
“Yield and prospects for capital growth are both important components of a rental property investment. When weighing up an opportunity would-be landlords need to balance both the achievable yield and the prospects for capital appreciation before striking a balance between the two. For landlords looking to invest over the medium to longer term the prospects for capital appreciation becomes increasingly important.
“Since 2013, capital growth has formed a growing part of the return for landlords across London and the South East of the UK. Although rents, alongside wages have grown strongly, they have lagged behind rising house prices. While inevitably this has led to a degree of yield erosion, when looking at yield and capital appreciation together, the total returns have increased by 45% over the past 12 months. Conversely, parts of Northern England and Wales have seen yields grow as house prices have recovered much more slowly. In 2013, rising rents outstripped house price growth across most of the North.
“While total return forms the bottom line for landlords, landlords also need to take into account other practical considerations to ensure this return is realised. For instance, many landlords with smaller portfolios choose to purchase near to their own home in order to be able to manage or keep an eye on their property investment. Equally, for landlords looking to invest over a relatively short period of time, the ability to sell quickly is important to minimise void periods during the sale process and to realise value growth.
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