In the last two years, the typical return on rental property has gone up from 4.9% to 5.8%, as found by specialist lending company Octane Capital.
Landlords are now earning 19% more in rent than they were two years ago, bringing in an average annual income of £15,144.
The costs to get started with a rental property have gone down by 17%, reducing from £12,037 in the previous period to £9,952 at present.
On the other hand, the expenses for maintaining a rental property have increased by 18%, leading to an annual cost of £15,592. This rise is largely due to increasing costs of mortgages.
Jonathan Samuels, Octane Capital’s CEO, commented that landlords are currently experiencing substantial growth in rental earnings despite a cooler property value appreciation. Even with the unstable market, investments are still yielding returns, he observed.
“While higher operational costs, particularly from increased mortgage rates, have slightly reduced net profits, the overall impact on returns hasn’t been drastic given the economic conditions and recent property market uncertainty,” he added.
Samuels suggested that landlords can still find ways to cut down borrowing costs by working with specialist lenders.
He also mentioned that the government’s push towards digital tax systems will incur some costs, including a £350 initial fee and about £110 for ongoing expenses. He doesn’t believe this will significantly deter investment appetite.
“Though the government aims to encourage landlords to exit the market with lower capital gains tax, our data indicates that property investment is still profitable, even if slightly less so than a few years back,” he remarked.
For investors, a downside has been a 6% annual decrease in property value growth, now at £15,728.
As a result, annual earnings have dropped by 6% to £15,280 when considering capital appreciation along with rental income, after deducting ongoing property investment costs. This is a decline from the previous figure of £16,285 per year.
