Despite the many sales and purchases in the housing market throughout 2020 and 2021, the rental market is still proving to be a very profitable place for UK expats and foreign nationals who own rental properties.
Stock Shortage and the Rental Market.
‘The stock shortage has put upwards pressure on house prices throughout the pandemic’ says Stuart Marshall. ‘However, the stock shortage is now contributing to a surge in the uptake of rental properties. With many homeowners having sold their homes for greatly inflated prices during the peak of the stamp duty holiday and other pandemic-associated government incentives, there is now a whole sector of the market struggling to find a new home to move onto. In July of 2021, there were 27% fewer homes on the market than at the same time in the previous year. For those that sold their homes during the pandemic, this stock shortage has created difficulties in finding a new home. Because of this, 10% of new tenancies on rental properties in 2021 have been taken by someone who is selling their home.’
The Areas of Interest.
‘What’s really interesting about this growing trend is the areas where sellers are more likely to rent. The three areas which have seen the highest number of new tenancies from those that have sold their homes are Scotland, Wales and the North West. These areas consistently crop up in our conversations with UK expats who are looking to purchase a rental property. Because of their high profitability from strong rental yields and capital growth, these areas are incredibly popular with UK expat and foreign national buy-to-let investors looking to make a foray into the UK property market. It is no surprise then that in Scotland, Wales and the North West, 16.4%, 15.3% and 11.8% of new tenancies in 2021 have been taken by those who have sold their homes as the increased competition for properties in these areas will mean fewer homes available for buyers. For discerning UK expat and foreign national investors, these areas will continue to turn profits in many different ways for long into the future.’
The rise in the numbers of tenants who have sold homes means that the rental market has become more competitive. This has led to 43% fewer homes in the rental market compared to this time last year. In turn, the lack of rental stock is pushing up the price of rental properties – rents in the UK rose by 6.2% in July 2021 compared to July 2020.
The stock shortage in rental properties is also in part due to the numbers of people who have been unable to graduate from the rental market into home ownership because of the inflated prices of property or the economic uncertainty that has been caused by Covid-19. For these people, staying in the rental market is the only option.
‘So, we have a number of factors at play in the rental market at the moment. A stock shortage caused by ex-homeowners unable to find a new home and existing renters being unable to afford a property of their own. We also have rising rents which are being caused by the high demand for rental property and the stock shortage. What this means is that owning a rental property is an incredibly profitable investment for UK expats and foreign nationals.’
Owning a UK rental property is generally considered to be a strong investment as UK property is relatively stable and offers strong returns over the course of a mortgage term. Properties in the most desirable areas are generally more affordable, with the average price of a property in the North West and Wales at £189,000 and £188,000 respectively. These lower purchase prices make them an excellent choice for prospective UK expat and foreign national investors.
With the numbers of those in the rental market unlikely to diminish any time soon, UK expats and foreign nationals looking to invest are likely to join the market at a great time. ‘There is bound to be a change on the horizon,’ says Stuart Marshall. ‘As we go into the Autumn, the prices of properties are bound to fall as the UK begins to feel the economic after-effects of the pandemic and the inevitable wave of redundancies and closures start to be felt with the end of the government’s incentives. With this uncertainty, the uptake of properties will be slower from first-time buyers and leave more properties available for UK expat buy-to-let investors. With the time taken to let a property also having fallen to only 8.9 days, the demand is there to start making instant returns from your investment too.’
Liquid Expat Mortgages
Unit F2, Waterfold Business Park,
Bury BL9 7BR
Phone: +44 (0) 161 871 1216
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