It’s been another tough year for buy-to-let investors in 2019.
On top of swallowing more punitive changes from HM Revenue and Customs, like an additional reduction in mortgage interest relief, landlords have also had to suffer the Tenant Fees Act of June, a new law which has seen letting agents pass some of the admin fees traditionally footed by the tenant onto the property owner instead.
On the up
One silver lining for investors, however, is that the impact of these measures, in thinning landlord numbers, has worsened the supply crunch and thus forced rents higher. Data from Howsy shows that the average rent in England has risen 0.9% in the last 12 months, with rents rising most significantly in Yorkshire and the Humber (up 5.1%).
In 2019 average rents increased in eight out of nine major English regions, the property lettings platform says, with rental costs dropping only in the North East (down 1.1%).
Annual Rent Increase by Region
|Location||Change in rent (2018–2019)|
|Yorkshire and the Humber||5.10%|
|East of England||1.20%|
Too much cost!
And some of the rent rises on a more local level have been quite blistering. In Exeter these have exploded by 28.7% on an average basis from 2018 levels, putting the Devon town at the top of the tree. Another nine locations saw rents rise by double-digit percentages.
It’s critical to stress, however, that conditions haven’t been sunny for all of England’s landlords. In the Northamptonshire town of Corby, for example, buy-to-let investors have seen the average rent plummet 10.5% over the past year, while those in Elmbridge in Surrey have also seen rents drop by more than 10%.
Even if you let out a property in one of those locations where rents are soaring skywards, I still don’t consider buy-to-let to be an attractive destination for your hard-earned cash. On a national basis, it’s quite possible that the 0.9% average rent rise in 2019 wasn’t enough to cover the increased tax, administrative, and running costs that many landlords have faced. And things threaten to get even tougher in 2020 as a raft of new changes come into force.
A better way to play property
In my opinion, a much better way to get rich from the UK property market is through share investing. Of course investors need to be careful – those investing in firms with high exposure to the physical retail sector are dicing with danger right now – though there’s a multitude of other ways to get rich from bricks and mortar.
One great way to get rich over the next decade, I believe, is to get some exposure to e-commerce. Even though broader retail conditions remain difficult right now, the amount of business being conducted by online sellers continues to thrive. Royal Mail said in its latest trading statement that parcel volumes were up a chunky 5% in the six months to September.
And so I think a good idea is to buy into firms that own logistics and distribution hubs that are integral to the business of internet retailing, like Tritax Big Box REIT and Urban Logistics REIT. The latter looks particularly attractive, too, as not only do City analysts expect earnings to swell by double-digit percentages over the next couple of years at least but current dividend projections leave it with mighty yields above 5% over the medium term. So forget about buy to let and put your hard-earned cash to work here instead, I say.
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Royston Wild has no position in any of the shares mentioned. The Motley Fool UK has recommended Tritax Big Box REIT. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.
Motley Fool UK 2019