Private landlords seem to be among the few winners of the recent economic lull. With the Bank of England keeping the interest rate fixed at 0.5%, which is predicted to last until February 2012, saving rates are rather dire. Cash ISAs are offering – on average – a rather unimpressive 2.54% and regular saving accounts are offering an extremely dire average rate of 0.89%. With inflation at 4.2% neither of these saving routes are making any money, in fact, in real terms they are actually making a loss.
Equities are just as lacklustre. In the second quarter of 2011 the FTSE fell by 1.07% and who knows what the third quarter results are going to be like.
So, back to landlords. According to the latest Rental Index from property website findaproperty.com, gross rental yields for British landlords came to 4.75%, on average, in the second quarter of 2011. Rents rose by 2% from April to June bringing the average UK property price to £876. This represents a 4.4% rise on this time last year.
There is, of course, plenty of regional variation, with the capital coming out trumps yet again. The average monthly rental of a London property was £1,979 in June. However, there has still been growth at the other end of the market. The northeast, which has notoriously been a tough place to earn any real money from rental, now sees average monthly rental rates of £582.
Prices are rising in coincidence with demand. As first time buyers fail to make it onto the property ladder they are forced to continue renting for several more years. Potential investors have been quick to jump onboard the sailing ship of rental property. There was a jump of 9.7% in the number of rental properties available on the market in Q2 and interestingly this increase in properties has done nothing to cool off rising rental rates.
It might be a good place to invest, but the rental market is not without its own round of risks. To manage your risk level, particularly against defaulted rent payments and damage, take out proper landlord or buy-to-let insurance. Buy to let insurance from Legal and General is landlord specific and includes cover against unpaid rent, legal fees, accidental damage, fire, theft and unforeseen events.
