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

Rents are increasing. But is this enough for investors to charge back into the buy-to-let segment?

The content of this article was relevant at the time of publishing. Circumstances change continuously and caution should therefore be exercised when relying upon any content contained within this article.

When investing, your capital is at risk. The value of your investments can go down as well as up and you may get back less than you put in.

Read More

The content of this article is provided for information purposes only and is not intended to be, nor does it constitute, any form of personal advice. Investments in a currency other than sterling are exposed to currency exchange risk. Currency exchange rates are constantly changing, which may affect the value of the investment in sterling terms. You could lose money in sterling even if the stock price rises in the currency of origin. Stocks listed on overseas exchanges may be subject to additional dealing and exchange rate charges, and may have other tax implications, and may not provide the same, or any, regulatory protection as in the UK.

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More.

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.

Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be assessed. Consider taking independent financial advice.

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.

More on Investing Articles

Investing Articles

Could the JD Sports Fashion share price double in the next five years?

The JD Sports Fashion share price has nearly halved in the past five years. Our writer thinks a proven business…

Read more »

Bus waiting in front of the London Stock Exchange on a sunny day.
Investing Articles

If interest rate cuts are coming, I think these UK growth stocks could soar!

Falling interest could be great news for UK growth stocks, especially those that have been under the cosh recently. Paul…

Read more »

Investing Articles

Are these the best stocks to buy on the FTSE right now?

With the UK stock market on the way to hitting new highs, this Fool is considering which are the best…

Read more »

Petrochemical engineer working at night with digital tablet inside oil and gas refinery plant
Investing Articles

Can the Centrica dividend keep on growing?

Christopher Ruane considers some positive factors that might see continued growth in the Centrica dividend -- as well as some…

Read more »

Smiling family of four enjoying breakfast at sunrise while camping
Investing Articles

How I’d turn my £12,000 of savings into passive income of £1,275 a month

This Fool is considering a strategy that he believes can help him achieve a stable passive income stream with a…

Read more »

Person holding magnifying glass over important document, reading the small print
Investing Articles

2 top FTSE 250 investment trusts trading at attractive discounts!

This pair of discounted FTSE 250 trusts appear to be on sale right now. Here's why I'd scoop up their…

Read more »

Smiling young man sitting in cafe and checking messages, with his laptop in front of him.
Investing Articles

3 things that could push the Lloyds share price to 60p and beyond

The Lloyds share price has broken through 50p. Next step 60p? And then what? Here are some thoughts on what…

Read more »

Young female business analyst looking at a graph chart while working from home
Investing Articles

£1,000 in Rolls-Royce shares a year ago would be worth this much now

Rolls-Royce shares have posted one of the best stock market gains of the past 12 months. But what might the…

Read more »