Buy-to-Let Continues to Beat the Inflation Rate

Latest News Confirms Property Investors Are Winners

When you invest in a buy-to-let property, you make money by the growth in the property’s value and from the rental income you receive. To improve your standard of living, you want to grow your capital and your income faster than the inflation rate. Despite all the uncertainty in the world, and all the negative news surrounding Brexit, buy-to-let property is still delivering inflation-proofed returns.

Rental Income Rising Faster Than the Inflation Rate

Like average earnings in the UK, rental prices are rising faster than inflation. The latest Consumer Price Index (CPI) reading in the UK is that prices have increased by 2.0% in July 2019. This is bang on the Bank of England’s target. According to Homelet’s Rental Index for July 2019, average rents are outstripping inflation. Across the UK, rents are 2.3% higher than a year earlier.

Rents are rising fast in London, with the average rental price in the capital now standing at £1,665 – 3.1% higher than last year. However, within the capital some boroughs are performing better than others. For example, rents in Westminster have jumped by an incredible 9.5% over a year, while in Camden they have fallen by 3.4%.

Regionally, buy-to-let landlords in the South West have done best, with a 4.5% annual rise – the highest in the country.

However, every region in the UK saw rents rise. In Scotland, rents are 4.3% higher on a year ago. The rental price increase in Wales was the same. The lowest increases came in the North East (0.8%) and Yorkshire & Humberside (0.9%). In seven of the country’s 12 regions, rental prices rose at or faster than inflation.

Across the country, the average rent is now £959 per month. That’s an increase of around £22 per month from this time last year – around £264 more each year.

Property Prices Are Forecast to Rise Faster Than Inflation

Remember all those doom and gloom forecasts of a collapse in property prices after the EU referendum? They haven’t happened. The closest we’ve come to a fall in prices is the recent June and July numbers – both RICS and Halifax have reported average price falls of around 0.2% in July following a 0.4% fall in June.

Despite the falls of the last two months, Halifax posts the annual price rise in July 2019 at 4.1%. That’s twice as fast as inflation, and faster-than-average earnings growth of 3.9%.

Doomsayers will point to the last two months’ falls as indicative of a reversing market, but this short-term trend looks to be about to change. According to the latest from reallymoving, the UK’s largest provider of instant quotes for home moving services, house prices in the UK are about to bounce – hard. It forecasts that average house prices will rise by:

  • 2% in August
  • 4% in September
  • 1% on an annualised basis in September 2019

CEO of reallymoving Rob Houghton says: “The outlook for the property market over the next three months is remarkably positive, considering the current political and economic context.” He cites policy decisions including scrapping stamp duty for downsizers, tax cuts, and the rush to beat Boris Johnson’s determination to exit the EU on 31st October as improving market sentiment.

Like rental price inflation, house price rises will not be uniform across the country. While some areas may see modest falls, reallymoving predicts that prices could increase by as much as 7% in the South East of England in the three months to October.

Between July 2016 and July 2019, CPI is up by 7.2%, while average house prices are up by 9.9%.

Whatever way you slice it, buy-to-let investors are beating inflation – in a period of which the mainstream media would have you believe has been shocking for property investment. This inflation-busting performance is set to continue, as the passive profits of property investment continue to accrue.

To learn more about buy-to-let benefits, contact Ezytrac today at +44 0 1522 503 717.

Live with passion

Brett Alegre-Wood

By |2019-09-09T10:24:06+01:00October 10th, 2019|Landlord lessons, Property Management|0 Comments

About the Author:

Brett has over 20 years experience in all facets of property, he owns various companies centred around property and is the driving force behind the education and training at Ezytrac. His companies have sold over £850 million in UK and London property and he manages over 1200 properties through his estate agency chain. Today he shares his time between UK, Australia and Singapore. He is married to Arlene and together they have 4 kids. Brett holds both the Level 3 Property Mark Qualifications for Property Sales and Property Lettings and Management.