The UK rental market has been in a state of flux for some time, with soaring rents, and increased demand from people priced out of buying their own home, plus a whole host of regulatory changes.
While some people might see these issues as a reason to steer clear, for savvy property investors they represent a huge amount of opportunity. These trends for increased demand and growing yields are reflected within many EU countries too, so the opportunities are not limited to the UK.
The resilience of the rental market
It’s becoming harder for young people to get on the property ladder in the UK, with average selling prices far exceeding any increases in average salaries. There are still some European countries, like Denmark, Sweden and Ireland, where property is more affordable, but in many places first time buyers are priced out of the market. While this is bad news for them, it’s great news for portfolio property investors as it means the UK and EU rental markets are seeing a steady growth in demand, especially in cities and commuter areas.
The key is to identify your potential rental yield and to find the areas where rental yields are strong or showing signs of growth. Northern England typically sees the strongest rental yields in the UK, based on the affordability of property. Head across the Irish Sea and Ireland is currently seeing very strong rental yields and benefits from strong UK links.
Rethinking your exit strategies
Gone are the days when landlords aspired to sell properties with vacant possession. If you’ve got reliable tenants, it benefits both the buyer and seller to keep them in place as it avoids any void periods and the complications of the eviction process. You can carry on making money up until completion and the new landlord gets a ready-made income stream with no set-up delays.
Of course, you need to be respectful when selling a house with tenants to keep the process smooth and stress-free for the people living in your property. For example, you’ll need to give at least 24 hours’ notice before any viewings, and it makes sense to keep an open line of communication so that they feel secure.
Stability, not speculation
Another interesting shift in the buy-to-let market across the EU and in the UK is the growing number of investors looking for long-term rental income rather than money from short-term flipping. This has a number of factors driving it, not least the huge increase in the cost of building materials and labour – flipping a property has become significantly more expensive and therefore a lot less profitable.
By contrast, investing in a buy-to-let with tenants who can provide an instant source of reliable cash flow is extremely attractive in our current period of economic instability. Having a regular, predictable income is very valuable and more and more investors are feeling the draw.
Whatever strategy you decide on, there are huge opportunities for property investors in the UK and the wider EU, and with rents continuing to rise as housing demand exceeds supply, that looks set to continue.
