Capital boost - why strong appreciation is good news for landlords

News at Howland Jones | 01/07/2022

The property market is constantly changing and over time these changes have a direct impact on the revenue landlords get from the homes they invest in.

Currently, capital appreciation is still strong, which is excellent news for landlords now and for when they decide to sell, if that is their intention.

Landlords who invest wisely are more likely to receive a good monthly income and the value of their property will grow over time.

Important considerations and calculations for landlords 

When investing in a property, there are various risks involved, but in recent years – when it comes to return on investment – property has outstripped stocks, shares and other asset classes. One of the aspects that makes the property market so appealing to so many is that, over time, house prices typically increase in value. And this has particularly been the case in recent years, even despite the pandemic and other challenges.

By making comparisons between the price that the property was purchased for with the current value of the home on the current market, a landlord can understand the return on the investment. By adding this to the rental income, an overall sum can be calculated.

With UK house prices at an all-time high, you can make these calculations to understand where you stand in the current market.

Important factors that tenants consider when moving include ease of access to the town, schools, and local amenities, to name a few. These factors also determine exactly how much the home will appreciate over time. 

If you have a firm understanding of the capital appreciation potential of a home before you invest in it, the chances of good capital gains over time are much greater.

Reasons for capital appreciation

Limited property supply coupled with a high level of demand for homes is driving the rise in house prices.

New homes are entering the rental market but as a result of a vast number of budding tenants seeking homes, there are not enough properties available.

Nationwide report that in May this year, the rate of annual house price growth went from 12.1% to 11.2%. Although a slight dip, these figures remain above 10%.

Nationwide’s findings show that prices rose by 0.9% month-on-month after taking into account seasonal effects.

February annual house price growth was 12.6%, which Nationwide reports as the highest pace since June 2021.

The Covid-19 pandemic resulted in many businesses having to close, and staff being dismissed, but since then there has been a rapid recovery as tenants have returned to city living.

Labour market conditions are positive as job vacancies are at a record high, meaning moving home is attainable for many in spite of the current cost-of-living crisis. 

Overall, the UK rental market has held up and is expected to perform well throughout the summer. It’s important that you remain in good standing with your tenants and stay fully compliant to ensure they you set yourself up for long-term success.

As a landlord, you must ensure that all homes are well-kept and keep up to date with changes within the economy as well as the industry. 

Consulting a local property expert is an excellent way to guarantee that your home is in good standing. It can also help you develop a greater understanding of capital appreciation when making a buy-to-let investment.

The findings from Nationwide and others still point to a booming market, and strong capital appreciation, which will be music to the ears of landlords who may feel the recent government White Paper on rental reform is another attack on them.

Here at Howland Jones, we can help you with your lettings journey and talk you through the potential rewards of capital appreciation over time.

Our offices are based in the village of Measham in the East Midlands, and we cover areas such as North West Leicestershire, South Derbyshire, Hinckley & Bosworth, North Warwickshire, Tamworth, Swadlincote, and Ibstock. You can find out all about us by getting in contact here.