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Buy-to-let rents here are booming! What should you do today?

As regular readers will know, we here at The Motley Fool, are not exactly brimming with enthusiasm over buy-to-let and the perceived opportunity to make delicious returns.

For the time being, though, rents are still rising in large parts of the country, illustrating the entrenched shortage of buy-to-let properties. And there’s one segment of the buy-to-let market in which landlord returns are really rocketing and that is in the arena of flat- and house-shares.

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Rents are surging

According to ideal flatmate’s latest Room Rental Index the average cost of a room in the UK stood at £535 per month in the first quarter, representing a handsome 11% year-on-year rise.

It’s hardly a shock to find that London commanded the most expensive average rents in quarter one at £745 per month, marking a solid 48% year-on-year rise. Glasgow, Bournemouth, Cambridge and Leeds locked out the top five with monthly rents sitting in a £40 range above £500 per month.

Highest Room Rental Costs

City

Monthly Rent

London

£745

Glasgow

£588

Bournemouth

£575

Cambridge

£562

Leeds

£548

Southampton

£546

Oxford

£544

Bristol

£534

Edinburgh

£525

Portsmouth

£515

Manchester

£464

Leicester

£441

Liverpool

£438

Sheffield

£428

Nottingham

£412

Plymouth

£401

Cardiff

£399

Birmingham

£364

Newcastle

£350

Belfast

£270

Aberdeen

£266

UK

£535

While London may have remained the most lucrative city for monthly rents, Leeds took the crown as the major UK city which has seen the largest rent rise over the past 12 months, up 50% to average £548 in the first three months of 2019 and smashing the average nationwide rise of 11%.

Things clearly aren’t rosy across the board, though. Indeed, more than a third of the cities studied by ideal flatmate saw average room rents fall back in quarter one, led by Sheffield, which nursed a whopping 22% decline.

Largest Annual Change

City

Annual Change

Leeds

50%

London

48%

Liverpool

35%

Portsmouth

32%

Leicester

27%

Glasgow

24%

Cambridge

21%

Bournemouth

21%

Southampton

16%

Edinburgh

14%

Bristol

13%

Manchester

10%

Nottingham

8%

Oxford

-5%

Birmingham

-5%

Plymouth

-8%

Belfast

-9%

Cardiff

-10%

Newcastle

-18%

Aberdeen

-19%

Sheffield

-22%

UK

11%

Stick with stocks!

A combination of high demand and low stock means that rents from the flatshares and homeshares are still rising at a jaw-dropping rate.

But does this mean that you or I should invest? I don’t think so. A backdrop  of falling tax relief, increased regulatory costs and mountains more paperwork make buy-to-let a much more challenging endeavour than in previous decades. And with property price growth slowing to a crawl, it’s unlikely that investors here will receive the kind of life-changing returns that they had in years gone by

If you’re eager to make money from property then a better bet is by participating in the stock market, in my opinion, and there’s a broad range of companies to choose from, from the housebuilders and self-storage operators to owners of primary healthcare properties. And what’s more, many of these shares offer the sort of returns that won’t leave you pining for the buy-to-let sector.

There’s never been a better time to get rich from the stocks and shares given the size of some of the dividends out there, and as buy-to-let becomes more expensive and more troublesome, I consider the equity market to be a much better way to try and make a fortune. And there’s plenty of great tips and tricks out there to help you to achieve that holy grail of making a million from your investment portfolio.

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Royston Wild has no position in any of the shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. 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.