Recent data shows that less affluent areas are driving rental growth in the UK property market and are likely to continue on this profitable trajectory. Understanding why will be important for UK expat and foreign national investors looking to make an informed investment decision.
Huge Rise in the Number of Rental Households.
With fewer young people buying a home, the number of privately rented households has grown by 1.12 million or 29% in the last decade. This is compared to only a 6% increase in the number of households generally. Clearly then, there is a disproportionate rise in the number of people renting compared to the general growth of households. ‘This rise in rental demand and consequential growth in the rental sector has led to huge profits for UK expat and foreign national landlords over the years’ says Stuart Marshall of Liquid Expat Mortgages. ‘But recent data from real estate agent, Hamptons International, suggests that understanding the causes of this rise in the number of privately rented households might be key to making a profitable investment in 2023.’
Less Affluent Areas Seeing Bigger Increases in Rental Households.
Much of the reason for the rise in the number of rental homes is to do with the tighter lending criteria introduced in the aftermath of the global financial crash. These tighter criteria put homeownership out of reach for many people with either low deposits or below average incomes. As a result, home ownership has become most difficult in less affluent areas. This is supported by Hamptons’ data which shows that the growth in the number of privately rented households between 2011 and 2021 was highest in the most deprived 10% of areas in the country. Accordingly, 23% of households in this poorest 10% now rent their home privately – an increase of 5% from 10 years ago. Expanding the focus further shows that 60% of privately rented homes are in the bottom 50% of affluent areas.
Less Affluent Areas to Drive Rental Growth.
‘But why should this matter for UK expat and foreign national investors? Well, choosing the right area is one of the most important parts of an investment journey and will go a great way to determining the success or failure of the investment venture. With rents rising so much in recent years, choosing an area with high rental demand will be incredibly important and lead to big profits for UK expat and foreign national investors. If less affluent areas are performing better when it comes to rental demand, then UK expat and foreign national investors would be wise to look in these areas when buying a property as they are more likely to make a larger profit. To put in perspective how profitable these less affluent areas are from an investment standpoint, rents paid in the 10% of most deprived areas have doubled between 2012 and 2022, to 5.4bn. Because of these factors, it’s likely that the less affluent areas of the UK will continue to drive rental growth throughout 2023 and become the ‘investment hotspots’ of the future.’
Properties in Less Affluent Areas Accessible with UK Expat and Foreign National Mortgage Products.
‘Further, properties in these less affluent areas are far more affordable than in many other areas of the country and are more likely to turn a profit more quickly than properties in other areas’ adds Stuart Marshall. ‘This can prove to be incredibly fruitful for UK expat and foreign national investors and is especially true for UK expat and foreign national investors utilising UK expat and foreign national mortgage products. These products can help investors to spread the cost of their investment and with property prices skewing lower in the less affluent areas, UK expat and foreign national mortgage products can be incredibly powerful, even enabling discerning investors to buy a portfolio of properties.’
‘Less affluent areas are also becoming more popular for buyers as high mortgage rates push people to look to more affordable areas and towards smaller properties. This means that UK expat and foreign national investments made in these areas are also likely to see big capital gains alongside high rental profits. This comes at a great time for UK expat and foreign national investors as buy-to-let mortgage choice is at its highest since before former Chancellor Kwasi Kwarteng’s mini-budget. The market is also commonly seeing improved choice for buyers while sellers are accepting average discounts of 4.5% or £14,100 off their asking prices.’
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