Blink and you may have missed the latest flip in buy to let property rental cycles.
Buy to let investors make money in two ways – profits on rents paid by tenants and the rising value of the homes where they live.
Before the property bubble burst in 2008, investors were making huge gains from fast appreciating prices.
House prices were rising so fast, speculating investors would buy homes offplan before they were built and sell them before developers had built the properties.
That all changed with the downturn.
Property prices stagnated but landlords won again as rents started to surge.
Buy to let returns beat shares or savings
Now, the market has flipped back. Rent rises have slowed but new research from the Property Partner Residential Market Index (PPRMI) reveals that the average property price increased by 9.5% in the year to the end of March 2016.
In the same period, the FTSE 100 tumbled by 3.9% and cash in the best-paying ISA only earned 1.4%.
The figures show speculating in property has outperformed putting money into shares or keeping as a cash pile.
The PPRMI confirms that many landlords, especially in London and the South East are making more money from rising house prices than they are from rents.
Buy to let landlords with mortgages have done even better, says PPRMI.
Property profits still alive
Giving an example of a rented home in Bedford, a desirable city just north of London, number crunchers say a £200,000 property with a 60% mortgage returned capital growth of £21,000 in a year.
The average return for London landlords with buy to let mortgages was calculated as 16.49%, falling to 6.03% across England and Wales.
Property Partner director Rob Weaver explained the figures were punctuated with different returns across the regions – with London showing the highest capital return (13.57%) and the North East the lowest (-1.38%).
“There’s a distinct gap developing between the regions and London,” he said. “Although monthly figures can be volatile, Yorkshire, Humber and the North East are looking fragile.
“Although the Brexit referendum is acting as a brake on investment, the factors that make buy to let attractive are still there – such as low unemployment, rising wages, a shortage of suitable housing and cheap mortgages.”
