The latest market insight from London lettings and estate agent, Benham and Reeves, indicates a substantial house price premium for properties in high rental demand areas. This trend presents a lucrative opportunity for buy-to-let landlords aiming to counteract recent challenges affecting profitability in the sector. The analysis reveals that properties in these sought-after locations command premiums of up to 34%.
Regional Price Premiums
Benham and Reeves compared average house prices in high rental demand areas across England with the wider regional averages. The findings show that the average house price in these high demand areas is £372,055, which is a 23% premium (£69,662) over the national average of £302,393. Certain regions demonstrate even more significant premiums. For instance, in the North West, the average house price in high rental demand areas is £289,863, a remarkable 33% premium (£72,338) compared to the regional average of £217,525.
The North East and Yorkshire and the Humber also show strong premiums of 30% and 29%, respectively. Other regions surpassing the national average include the South East (28%) and the West Midlands (25%). Even in the East of England, where the premium is the lowest, properties still sell for an average of 15% above the regional average.
Yields and Market Stability
Further analysis by Benham and Reeves suggests that investing in high rental demand areas not only boosts property values but also enhances rental yields. Landlords in these areas achieve an average yield of 5.49%, compared to 5.15% in non-high rental demand areas. Marc von Grundherr, Director of Benham and Reeves, emphasised the stability and reliability of such investments. “It remains a strong and reliable investment, with long-term stability that often cannot be matched by other more volatile investment asset classes such as stocks or collectables,” he stated.
Availability of High Demand Properties
Currently, there are approximately 24,857 properties available in high rental demand areas across England. The South East has the highest proportion of these properties at 21%, followed by the East of England (18%), South West (17%), North West (12%), East Midlands (12%), West Midlands (10%), Yorkshire and Humber (7%), London (2%), and the North East (1%).
Von Grundherr pointed out the strategic importance of location for maximising investment returns. “Of course, where you invest is as important as what you invest in, and identifying high demand areas is vital when maximising the returns available. Investing in a high rental demand area is also likely to protect the value of your investment in the long run, with properties in these locations commanding impressive premiums when compared to the wider region,” he concluded.
The data underscores the value of strategic property investment in high rental demand areas, offering both immediate and long-term financial benefits for landlords navigating an evolving market.
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