Considering a rental investment?
Many people call into our office asking about rental investments. I love chatting with them over a coffee and offering some insight into the rental market in Cardiff. More and more people have been seeking property as an investment, as they realise their money in the bank is not performing as well as expected.
We talk about rental returns, yields and what areas provide a worthwhile investment. It is good idea to decide whether you would prefer a higher rental yield or a better capital growth – sometimes these do not always come hand in hand. A lot of landlords prefer a high rental yield property. Your rental yield is calculated by taking the amount you paid for the property, divided by the amount you receive in rent each year.
Higher yields are getting harder to achieve nowadays with the current average yield in England & Wales being around 4.4%, this is down from 4.8% recorded last year. Although according to mortgage broker Private Finance, Cardiff is in third position of best performing property investment locations with average yields of 6%. Properties like HMO’s can provide better rental yields – however they do not always provide the largest return on your capital when you decide to sell. Some landlords will aim for good capital growth. This is the profit you earn when you sell your property for more than you paid for it. Homes in areas of generous growth are not that hard to find, however they can be more expensive to buy and normally require a longer-term investment.
So how is the rental market doing?
Rates of growth, for both asking and achieved rents, slowed during 2017. Rightmove report average asking rents rose by just 0.7% across the UK (excluding London), their lowest rise since 2014. Meanwhile, achieved rents across Great Britain rose by 1.2% in the 12 months to December, the lowest rate of growth since the Office for National Statistics (ONS) index of private housing rental prices was created. Most experts believe rents will rise in 2018, on the presumption that the ban on letting agents’ fees will contribute to growth in rents as costs are transferred.
UK inflation fell back slightly to 3.0% in December, its first fall since June. This was mainly due to the impact of air fares, according to data released by the ONS. While it is too early to say whether this heralds a longer term reduction in the inflation rate, the Bank of England believe inflation will fall back to its 2% target during 2018. The UK’s economy was stronger than expected at the end of 2017, growing by 0.5% in the final quarter. Over the year it grew by 1.5%, slightly higher than the anticipated rise of 1.4%.
Cardiff Rental Market
Now let’s focus on the Cardiff rental market. Over the last 12 months, the average rent achieved for properties let in Cardiff was £707 per month – this has not changed from the previous 12 month period. 54% of properties let in the past 12 months were flats, which achieved an average rental value of £676 per month, down 1%. Houses averaged at £756 per month, a non-mover with 0% change. 56% of tenants in Cardiff are aged between 18 and 29 – and the average age of tenants is 31. This is an interesting factor when deciding on the right investment property, as these are more than likely the demographic of tenants who will be renting your property.
Digging a bit deeper, we can see that the CF14 area of Cardiff has an average rent of £724 per month, this is up 1% in the last 12 months. Interestingly, there has been a significant jump of 49.8% change in average rents achieved in detached properties in the last 12 months and the average age of tenants is 36, showing families are the main demographic here.
If you would like more information about the Cardiff property market you can visit www.cardiffproperty.info. Alternatively, email me at email@example.com or pop into our office for a coffee and a chat.
Working with property professionals for over 20 years providing advice and services to all property investors.