Landlords are Warned to Look Long-term after a Year Filled with Positives

17 August 2012 Categories: News

Landlords are Warned to Look Long-term after a Year Filled with Positives

If recent reports are anything to go by it seems that landlords are at present benefiting from the highest average rents of the last 12 months, (currently £728), the highest average rental yields of the last 12 months (over 6%), the shortest void periods of the last 12 months and the longest average tenancy length of around 20 months before tenants decide to move on. All this positive news is very encouraging however Pricewaterhouse Coopers have now warned that long term the buy to let market may not be as profitable for investors as other forms of investment.

In fact, after analysing the market conditions and how they are changing, PwC have projected a rather disheartening 3% return per year from now until 2025. This figure is said to be before tax but after running costs are deducted. They also described the private rental sector as being on the one hand significantly riskier than index-linked gilts but on the other offering lower risk and expected return levels than equities.

Chief economist for PwC, John Hawksworth, commented on the predictions, saying “Our analysis suggests that the prospective return on housing in the period to 2025, while not as good as many people have got used to in recent decades, could be broadly similar in terms of both risk and expected return to a balanced mix of index-linked gilts and equities.

“Given that housing returns will not be perfectly correlated with returns on equities and gilts, including housing in an investment portfolio together with these other assets could have some advantages in terms of diversifying risk.