Why is rental demand in the UK is currently sky high?

House prices remain stubbornly stagnant, the UK Government is struggling to resuscitate the economy and yet one sector within the property industry is positively booming: Buy to Let.

The decision to become a ‘Buy to Let landlord’ is actually set to be 2013′s most popular career change, with thousands of people seeking to take advantage of a sector that shows no signs of slowing.

Since 2009, average UK rental values have risen by 13.6%, whereas property values have remained flat or fallen. New data by online property letting specialist, Tenants4u.com, show that landlords are reaping the benefits.

As a nation, we are increasingly become renters rather than buyers. In the last decade, the proportion of UK households renting has increased from 31% to 36%, according to recent Census figures. UK cities in particular are registering very strong demand for rental properties. Take Westminster as an example, where four out of every ten homes are not owned, but rented.

It’s clear that opportunities look set to remain for current and prospective landlords for some time yet, but how should new Buy to Let landlords seek to take advantage of these favourable market conditions?

Here are some top tips from Tenants4U.com and some of Britain’s best-known property experts:

Phil Spencer (Location, Location, Location)

Phil recommends that you buy in a location that you know and target a specifc type of tenant for your property.

“If you understand the housing market where you live, you are likely to make a more informed decision than if you were trying to buy 150 miles away,” says Phil.

“Then decide what type of person you want to rent your property. Students, young professionals, couples or families? What do they look for? How much will they pay? How will they travel to work?”

Amanda Lamb (A place in the Sun)

Almost predictably, Amanda’s advice is to follow the sun, but to also keep one eye on the budget of course.

“There are plenty of bargains overseas right now. You can buy cheaply in perennially popular holiday destinations,” explains Lamb.

“I suggest the Algarve in Portugal. It is easy to get to, and popular with golfers and families. The market is consistent, but the area isn’t overdeveloped. France is also an enduring and easy-to-get-to favourite with British holiday makers,” she says.

“However my hot tip is Florida. There are fantastic bargains around Orlando, Kissimmee and Miami for £160,000 to £250,000. The rental market is strong, too.”

Tommy Walsh (Ground Force)

“We acquired our first BTL 25 years ago. My wife, Marie, and I have always seen it as a good investment,” says Walsh.

“Unsurprisingly, he is keen on fixing-up houses. This makes them more likely to produce capital appreciation when they are eventually sold. They also produce good yields until then. Modernised properties let quicker and for higher rents than older properties, too.”

Tommy does offer a word of caution though: “Avoid buildings with major structural defects unless you are an experienced builder with deep pockets.”

Where to start?

Figures at Tenants4U.com clearly show that London is undoubtedly the UK’s letting jewel in the crown, with more than 45% of all households in the city being rented, rather than owned. The average rental value for a home in London is over £1,100 per month and continues to rise.

Some other UK Buy to Let hotspots:

- Maidenhead
- Exeter
- Cambridge
- Bristol
- Milton Keynes
- Inverness
- Aberdeen
- London, Canary Wharf
- Central Manchester

The typical UK rental property returns an average yield of 7% per year – a great deal more than can be currently earned through most banks or building societies. Savills are currently forecasting that London rents will continue to rise by a staggering 26.4% over the next five years.

One way in which to increase your rental yield still further is to use an online property letting service, such as the Tenants4U ‘free property letting service’. In the past, the majority of landlords would rent their property using a High Street Agent, paying an average of a month’s rent for this service.

The Tenants4U.com service allows a landlord to let their property and save significant costs (up to £2,000) and also allows Landlords to stay in control of the letting process, by conducting the tenant viewings themselves. For more information on the Tenants4U.com property letting services.

Whether you are a landlord seeking to expand your portfolio or new to the Buy to Let scene, it seems that 2013 will be a buoyant year for the sector.