In the last year, landlords across England and Wales have witnessed an encouraging 8.7% surge in their rental income, despite a backdrop of escalating costs and tighter governmental regulations.
This revelation emerges from a recent study by London-based estate and lettings agency, Benham and Reeves. By comparing the average rental incomes based on portfolio sizes and individual rent values from Q1 2022 to Q1 2023, the agency provides fresh insights into the buy-to-let market’s resilience.
Interestingly, while portfolio sizes nationwide have shrunk by 5.6% year-on-year, plummeting from an average of 9.1 properties to 8.6, rents have shown a robust growth of 15.1%. Consequently, average rents have swelled from £7,396 in Q1 2022 to £8,510 in Q1 2023. This upward trajectory implies that the average annual income for landlords has risen from £67,304 to £73,186 – marking an increment of £5,882 or 8.7%.
Regionally, London has witnessed the most notable income surge. The capital’s average property portfolio size has slightly dipped from 7.6 to 7.5 properties. However, the average rent fetched by each property has leapt by a remarkable 34.7% to £13,095. This culminates in a 32.9% hike in annual rental revenue from the average buy-to-let portfolio in London, now standing at £98,213.
The East of England, despite a 7.7% downturn in rental values, has reported an impressive 32.7% growth in portfolio income. This upswing is attributed to a pronounced expansion in portfolio sizes, which have swelled from 6.4 to 9.2 properties over the year.
Other regions recording growth in portfolio income include the South East, Yorkshire & Humber, South West, North West, and North East, registering gains of 27.8%, 16.4%, 15.5%, 5.5%, and 0.6% respectively.
However, it’s not all rosy. Three regions have grappled with diminished portfolio incomes over the past year. Wales bore the brunt, with a decline of 19.2%. Surprisingly, this slump occurred despite Welsh properties recording the most substantial rental increase among all regions at 41.5%. The downturn is largely a consequence of the drastic fall in average portfolio sizes, which plummeted from 12.6 to 7.2 properties.
Similarly, the East Midlands observed an 11.1% dip in portfolio income, propelled by the reduction in portfolio size from 11.8 properties in 2022 to 7.8 in 2023. The West Midlands, on the other hand, experienced a modest income decline of 1.2%, even as portfolios expanded from 8.5 to 9.2 properties. This was due to an 8.7% decrease in the average rental income per property.
Director of Benham and Reeves, Marc von Grundherr, commented:
“Some landlords have seen their potential profits hit hard by crass government policy making and increasing mortgage rates and this has led to many reducing the size of their portfolios, which has further reduced the annual income generated via buy-to-let portfolios. .
But we would suggest landlords think twice before offloading because, as we’re seeing across much of the country, rent values are increasing at quite a rate and have hit all time highs across the capital, in particular. This has been more than enough to offset other increased costs, such as a spike in mortgage rates.
With mortgage rates very unlikely to sink back to the incredible lows the nation has enjoyed in recent years, rental demand is only going to grow stronger, meaning that rental values should remain consistently strong.”