Buy-to-let (BTL) rental portfolio incomes in England and Wales have increased by 8.7% in the past year, despite concerns about a difficult environment for landlords, according to research by Benham and Reeves.
Previous research revealed that portfolio sizes fell by 5.6% – from 9.1 properties to 8.6 – over the space of a year.
However, Benahm and Reeves found that the average rent value increased by 15.1%, rising from £7,396 in Q1 2022 to £8,510 in Q1 2023.
As such, the average annual portfolio income increased from £67,304 to £73,186 over the same period, an increase of £5,882.
The biggest income increase has been seen in London, where average portfolio size showed the smallest decline, from 7.6 properties to 7.5, while average rental income per property rose by 34.7% to £13,095.
Annual rental income generated from the average BTL portfolio within the capital increased by 32.9%, to £98,213.
Despite falling rent values leading to a 7.7% decrease in the income per property, landlords in the East of England enjoyed a portfolio income increase of 32.7%, due to an increase in portfolio size, from 6.4 properties to 9.2.
Portfolio income also increased in the South East (27.8%), Yorkshire & Humber (16.4%), the South West (15.5%), North West (5.5%), and North East (0.6%).
However, Wales saw the most significant decrease (-19.2%), despite the average rental income per property seeing the biggest increase of all regions (41.5%); therefore this was driven by the average portfolio size falling from 12.6 properties to 7.2.
The East Midlands saw portfolio incomes fall by 11.1%, driven by a shrinking average portfolio size, from 11.8 in 2022 to 7.8 in 2023.
The West Midlands saw portfolios increase from 8.5 to 9.2, but a drop of -8.7% in income per property meant that portfolio income fell by 1.2%.
Marc von Grundherr, director at Benham and Reeves, said: “Some landlords have seen their potential profits hit hard by crass government policy making and increasing mortgage rates and this has led to many reducing the size of their portfolios, which has further reduced the annual income generated via buy-to-let portfolios.
“But we would suggest landlords think twice before offloading because, as we’re seeing across much of the country, rent values are increasing at quite a rate and have hit all time highs across the capital, in particular.
“This has been more than enough to offset other increased costs, such as a spike in mortgage rates.
“With mortgage rates very unlikely to sink back to the incredible lows the nation has enjoyed in recent years, rental demand is only going to grow stronger, meaning that rental values should remain consistently strong.”
