At first glance it appears that Britain’s buy-to-let market continues to chug along nicely. The latest data from UK Finance showed 5,800 new buy-to-let home purchase mortgages completed in the month of July, up 5.5% from the same month in 2018.
But if a lifetime of watching horror movies has taught me anything, it’s that a cadaver tends to twitch before it expires completely. And the same can likely be said for the buy-to-let market.
Through a combination of rising tax and operating costs, and a steady scraping away of landlord rights, buy to let is clearly losing its appeal as a major asset class. It’s why recent data also shows that a quarter of landlords are thinking of exiting the sector entirely in the near future.
And conditions threaten to get worse and worse as increasingly desperate governments try to remedy the housing crisis by forcing more and more rental property owners to sell up. Things threaten to get particularly apocalyptic should the Labour Party secure the keys to 10 Downing Street and tip the balance further in favour of tenants.
An internet sensation
So why endure that dreadful combination of pathetic returns and colossal aggravation when you can play the property market through high-paying dividend stocks instead? Take Warehouse REIT (LSE: WHR), for example.
You’d be much better off investing your hard-earned cash here, I believe. Warehouse REIT, which operates a “high-quality portfolio of urban warehouse assets in key locations around the UK”, has seen profits explode in recent years thanks in no small part to the rapid expansion of e-commerce in this country.
The latest data shows that this breakneck growth is set to continue for some time yet. One particular study predicts that total internet spending by Britons will surge by almost 30% between now and 2024 alone.
Splashing the cash
What’s more, Warehouse REIT has big plans to exploit this trend to its fullest. In March it raised an extra £76.5m through a share placing and has been busy snapping up assets with the proceeds. Just this week it shelled out a cool £70m to acquire eight warehouse and distribution assets from Aviva Investors, a move that follows a stream of other tidy asset acquisitions stretching from Northampton to Doncaster, and Wakefield to Aberdeen.
Real estate investment trust rules mean that shareholders can expect to be lavished with bumper dividends from such stocks. For the years to March 2020 and 2021, this particular AIM company isn’t likely to disappoint – based on current City projections, yields should clock in at a mighty 6% and 6.3% respectively.
Warehouse REIT might command a premium (it trades on a forward price-to-earnings ratio of 20.2 times) but it’s a share that I’d happily buy today and hold for many years to come.
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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.