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Rents are rising in the UK! So should you invest in buy-to-let?

For those aspiring to get on the buy-to-let ladder, or indeed those individuals who already own a property portfolio, fresh data on UK rent levels must have made for cheery reading.

An unintended consequence of the government’s attack on the buy-to-let sector is that those who haven’t yet been decided to sell up are benefiting from the reduction in the number of rental properties out there. To illustrate this, the Office of National Statistics announced last week that private rents paid in May rose 1.3% on an annual basis, edging up from 1.2% in April.

Selling out

As I say, government initiatives to free up homes for first-time buyers is having a detrimental effect on renters who are having to pay more and more for accommodation. By raising tax bills for landlords and intensifying property regulations, politicians are either prompting them to pass these costs onto their tenants, or to sell out entirely and reduce the amount of rental stock still further.

And recent data from the Association of Residential Letting Agents suggests the landlord exodus is worsening. Its latest report for April shows letting agents encountered the largest number of buy-to-let owners selling their properties for almost a year.

Don’t be suckered in by the pull of bigger rents, I say. There’s good reason why landlords are exiting the market en masse, with returns diminishing and regulatory changes creating more and more work for them. I think there’s much better ways to make your money work for you, even if you remain determined to grab a slice of the property market.

3 perfect property picks

Indeed, one great way of achieving this is by buying into property investment trust Impact Healthcare, in my opinion. As an owner of residential care homes, it’s well placed to capitalise on Britain’s rapidly-ageing population and profits boomed 74% in 2018, reflecting this fertile trading landscape as well as the consequences of its aggressive acquisition strategy.

I believe Lok’n Store Group is another great pick today. Forget about the uncertainties of Brexit and the impact this is having on consumer spending power. Instead, think about the number of Britons hoarding more and more possessions, but having less and less space in which to keep them. Result is the demand for the self-storage specialists continues to grow.

This was evident in Lok’n Store’s most recent financials in which a combination of occupancy growth and unit price hikes boosted pre-tax profits 20% in the six months to January.

Or how about GCP Student Living, a real estate investment trust which provides accommodation to university scholars nationwide? Reflecting the steady growth in student numbers at home and abroad, total returns for investors have grown almost 120% since it listed on the London market at the turn of the decade. And there’s little indication that renter numbers are about to slip.

So why take a chance on the increasingly hostile buy-to-let market, I ask? I reckon you’d be much better using your money to invest in the stock market.

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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.