High rental demand areas command house price premium of up to 34%

The latest market insight from London lettings and estate agent, Benham and Reeves, reveals that there is a significant house price premium for properties located in high rental demand areas, making these areas particularly good investment targets for buy-to-let landlords who are looking to mitigate recent efforts to reduce profitability in the sector.

Benham and Reeves analysed average house price data in England’s high rental demand areas* and compared it to the wider average house price in each region* to reveal how a bustling local rental market can have an incredibly positive impact on the value of property investments.

Landlords face many challenges that have dented buy-to-let profitability over recent years, but with property prices showing impressive resilience even during the most tumultuous economic conditions, and the demand for rental properties as strong as it has ever been, it remains a solid and reliable investment with yields of up to and above 5% over the past five years.

And now, the market analysis by Benham and Reeves shows that there is even more investment potential for buy-to-let landlords who invest in high rental demand areas.

High rental demand areas home to property premiums of 24%
Across England, the average house price in areas of high rental demand is £372,055. This is a price premium of 23% (£69,662) compared to the nation’s wider average house price of £302,393

This average premium is even stronger in certain regions of the country.

In the North West, the average house price in high rental demand areas is £289,863. This is a premium of 33% (£72,338) compared to the region’s overall average price of £217,525

In the North East, the high rental demand house price premium is 30%, while Yorkshire and the Humber offers a premium of 29%.

The premium also exceeds the national average in the South East (28%), and West Midlands (25%).

Even in the East of England, where the high rental demand price premium is at its lowest, homes still sell for an average of 15% above the wider regional average.

Do high demand areas yield better returns?
Additional analysis by Benham and Reeves shows that high rental demand areas offer landlords who invest an average yield* of 5.49% versus 5.15% in non-high rental demand areas.

Which regions have the highest stock of available high rental demand properties?
Across England, there are an estimated 24,857 properties located in high rental demand areas currently available on the market.

The highest proportion of these are found in the South East (21%), followed by the East of England (18%), South West (17%), North West (12%), East Midlands (12%), West Midlands (10%), Yorkshire & Humber (7%), London (2%), and the North East (1%).

Director of Benham and Reeves, Marc von Grundherr, commented:

“Things may not have been easy for buy-to-let landlords in recent years, as increased rules and regulations have been implemented to reduce the profitability of the average investor’s portfolio.

However, it remains a strong and reliable investment, with long-term stability that often cannot be matched by other more volatile investment asset classes such as stocks or collectables.

Of course, where you invest is as important as what you invest in and identifying high demand areas is vital when maximising the returns available.

What’s more, investing in a high rental demand area is also likely to protect the value of your investment in the long run, with properties in these locations commanding impressive premiums when compared to the wider region.”