Investing in buy-to-let is ‘getting more costly by the year’ as income drops

Landlords have seen income from property investment and management fall by an average of almost 20% since 2011, new research shows. 

A survey of almost 800 members of the National Landlords Association (NLA) revealed an average rental yield of 5.4% in the final quarter of last year, down from 6.7% in 2011. 

This fall of 19.4% represents a drop in income of more than £19,000 against an average residential property portfolio, currently valued at £1.489m, based on the research undertaken by the NLA.

Landlords with larger portfolios of 20-plus properties have been worst affected over the past nine years, having seen yields drop by almost one third during that time. 

The figures show that landlords with larger portfolios have typically seen achievable yields fall from 7.7% less than a decade ago to 5.8% today.

Throughout the last decade, the cost of buying property and managing homes has increased significantly, whilst typical monthly rents have increased below inflation over the same period. 

For instance, since 2011 average residential property prices have increased by 40.23%, whilst rents have risen by just 14.5%. 

Richard Lambert, chief executive officer of the NLA, said: “Providing good quality rented homes is a costly business and getting more costly by the year.

“Although it is popular to paint private landlords as greedy parasites, only interested in pushing rents as high as they can go, the fact that rents continue to track below inflation, and far behind house price inflation, illustrates that this is far from the case.

“Being a landlord in the UK remains a worthwhile, and potentially profitable endeavour, but it is not a means of turning a quick profit. Anyone planning for future investments should think very carefully about their options and maintain realistic expectations of a reasonable return.

“A long-term strategy is essential, as is a commitment to providing a high quality service.”

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