Rental Demand in Cities
The last decade has seen the amount of people in the Private Rented Sector (PRS) who are living in urban areas rise from 80% to 86%, a figure which many expect will only grow in coming years.
It’s no surprise that urban areas are favourites for tenants. Properties in cities can have smaller floorplans and often no gardens or multiple parking spaces, yet are still massively expensive to buy, partially explaining why 86% prefer to rent.
Another explanation is that renting opens the door to living in beautiful apartments in vibrant city centres for a manageable price. Plus, the flexibility rental properties offer (as short term tenancies allow tenants to come and go quickly) also holds a strong appeal to the professionals who typically live in the city. Ultimately, there are a whole host of advantages for city-dwellers to rent rather than buy, and these only benefit investors.
Increases in Rent
Why? Because such increasing demand is driving rents higher and higher. In July, as many as 1 in 3 lettings agents reported increases, as tenants are willing to spend more on living in rental properties. This is great news for investors, as higher rents leave them with higher returns.
As for how much rents have increased by- tenants’ wage growth and inflation rises have meant that national rents have increased by 2.5% in the twelve months to June. This is a better figure than the past two years, which only saw rental increases of 1.5% in the year leading to June 2014 and 2.2% in the year leading to June 2013.
Positive Yields for Regional Cities
Location is crucial for investors wanting to make the most of increasing popularity and rental returns. These days, regional locations offer some of the best yields in the business. Prime cities, outside of London, can expect impressive yields of above 6%. Unfortunately returns in the capital are more modest, typically around 4% and lowering the closer you get to the centre.
Alternatively, places like Leeds and Manchester are experiencing mini booms in their city centres. Investors into Manchester, which is currently in the limelight thanks to a number of high-profile government schemes (devolution and the Northern Powerhouse) focused on the city, can expect average yields of 6.25%.
Leeds is an even better prospect for investors, as it offers 7% yields, some of the highest yields in the country. One of the most popular up-coming residential schemes in the city is X1 Aire, a contemporary residential development comprised of 147 luxury 1 and 2 bed apartments.
X1 Aire is in a highly sought after location close to the city centre. Leeds is a highly undersupplied market, popular with students and professionals alike, yet with very few rental options available. X1 Aire promises boutique apartments catering to those who prefer the pros of the PRS: luxury interiors, on-site management company and gymnasium.