Rising rents tempt landlords back to investing

Landlords are increasingly looking at investing in a rental property because of rising rents, one real estate firm says.

According to Hamptons, this year has seen investors accounting for the largest share of home buyers since 2016.

The firm says that 12.2% of homes were snapped up by investors – up from 2021’s figure of 11.7%.

The data also reveals that 37% of offers being made by landlords last month were on properties that had no offers.

In January, property investors accounted for just 14% of the market.

The best area for generating yields

Hamptons also reveals that the best area for generating yields is Hartlepool, for the second year running.

And all the top 10 yielding hotspots are in the north of England or Wales.

Plus, annual rental growth has strengthened for the third month running, with the best returns being found in Scotland (12.3%).

Rents there are rising quicker than in any other region since 2012 when Hamptons started compiling the data.

Landlords struggled to make their investment deals stack up

Hamptons says that earlier this year, many landlords struggled to make their investment deals stack up because of record prices and stiff competition from other buyers.

That led to investors sitting back and watching the market and in recent months they have re-emerged to snap up those homes that have ‘lingered on the market’.

The firm says that the average investor is buying a home that has been on the market for 54 days in November, up from just 33 days in November last year.

By comparison, first-time buyers are purchasing a home that has been marketed for an average of 40 days, while homes bought by those selling their home to buy another, had been advertised for 50 days.

Investing in locations towards the top of the yield league table

Landlords are also investing in locations towards the top of the yield league table, with 56% of new investor purchases being made in places with average yields of 6% and above – a figure which has risen from 40% a decade ago.

Meanwhile, 85% of homes sold by investors this year were generating a yield of less than 6%.

Aneisha Beveridge, the head of research at Hamptons, said: “Rising rents are tempting landlords to dip a toe back into the slowing sales market to try and pick up deals they couldn’t have got six months ago.

“With sellers more open to negotiation and rents rising rapidly, returns for equity-rich landlords have been rising.

“While we’re unlikely to see landlords return to buying at pre-stamp duty surcharge numbers, it’s possible they may outnumber first-time buyers in some months next year, as was common before 2016.”

‘Rental growth continues to strengthen’

Ms Beveridge added: “While house price growth is slowing, rental growth continues to strengthen, offsetting some, but not all, of landlord’s increased costs.

“It’s these rising costs which are likely to mean rental growth will remain high for the next few years.

“In Scotland, where landlords are capped in their ability to pass on higher costs to sitting tenants, rents on newly-let properties will likely continue topping the growth charts.

“When a tenant leaves and a home is re-advertised, the jump back up to market rate is much larger.”

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