Here is Property Options’ latest update on the UK Buy To Let (BTL) market – for February 2018.
This update is by economist Chris Worthington, who is one of our regular PIM speakers. He will be speaking at this month’s meeting.
Employment and Pay
The latest statistics on the economy released by the Office for National Statistics (ONS) present a familiar but puzzling state of affairs.
In the last quarter of 2017 total employment in the UK increased by 102,000 taking the employment rate to a record level of 75.3%. Vacancies also hit a record high at 810,000 indicating strong hiring by firms.
However the ONS also reports that average wages were up only 2.3% year on year, while consumer price inflation increased by 3.1%. The net effect is that whereas high levels of employment would normally force employers to increase pay in order to recruit new staff in real terms, average pay has fallen.
This is likely to create a knock on effect in terms of the affordability of rents and the available statistics confirm that rent rises in 2017 were moderate.
Rightmove found that national average asking rent increased by only 0.7% in 2017, less than 2016 (3.0%) and 2015 (3.7%). In the South East average rents fell by 0.7%.
Buy To Let
In a fairly weak rental market Buy to Let (BTL) investors seeking higher rents and yields have the option of investing in a house in multiple occupation (HMO).
According to the BTL index published by Mortgages for Business the average yield from an HMO investment in 2017 was 8.9%, the highest of all BTL property types.
Jeni Browne, Sales Director at Mortgages for Business commented “the attractiveness of HMOs as a BTL investment has increased in recent years not only because of the higher yields on offer but because serious investors are keener to diversify their portfolios.”
Rents and Affordability
However obtaining a reasonable yield is dependent on rents and a recent report from pensions and insurance firm Scottish Widows indicates that for many tenants rents are reaching the limit of affordability.
The report found that 51% of tenants are concerned about not being able to pay the rent and often tenants have a low level of savings to fall back on.
Approximately 46% of tenants are in rented accommodation because they can’t afford to buy and 60% said that they are not saving for the long term because they can’t afford to, a finding that is quite consistent with pay falling behind inflation.
The housing crisis continues, it does not benefit anyone least of all tenants in low paid jobs.
Find Out More
We will all be discussing the latest position on the property market, both in Bristol and across the UK, at our next PIM on Thursday 22 February 2018 at Future Inn, Bristol City Centre, 6-9 pm.
We hope you will join us then.
For more info and to reserve your place Click Below