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Buy-to-let market plateaus in Q2 as tenant demand stabilises

  • 10/08/2016
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Tenant demand for private rental property is plateauing across the UK, as 45% of landlords report no change during the second quarter of 2016.

Research from BM Solutions revealed that landlords in central London were the only UK region experiencing a drop in tenant demand, while just over a quarter of landlords across the UK have seen demand rise.

Scotland was the only region to see tenant demand rise in Q2, the research showed, rising from 33% to 41%, while all other regions saw a drop or no change. Landlords in the north west were subject to the biggest dip in increasing demand, down 15% on the first quarter to 23%.

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, particularly in terms of landlords’ prospects for capital gains.

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.

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