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Flood risk is dampening rental growth as tenants opt for higher ground

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Areas, where flooding is more likely to happen, have seen lower rental growth in the past five years, analysis from landlord letting agency Bunk shows.

Bunk looked at areas with a high to medium risk of flooding and how rental growth compares across these areas depending on the severity of the flood risk.

Between 2014 and 2019 areas where more than 30% of postcodes were at a high risk of flooding saw rental growth of 10.71%.

This compares to 12.75% in areas where 20-30% of postcodes are high risk, and 15.26% between 10-20%.

Halifax and Canterbury see low five-year rental growth

With 38.55% of its postcodes being at high risk of flooding, rents in Halifax increased by just 0.78% in the past two years and 1.78% in the past five.

In Canterbury, where 39.93% postcodes are at a high risk of flooding, rental growth has been slow in the past five years at 2.34%. However, they seem to be bouncing back, rising by 8.31% in the past two.

On average, UK rents rose by 11.86% between 2014 and 2019 and 3.54% between 2017 and 2019 – so both Halifax and Canterbury are lagging behind the average in the past five years.

Cambridge and Newcastle on the rise despite the risks

Some areas are seeing very strong rental growth despite flood risks.

Cambridge, for example, saw rental growth of 9.08% in the past two years and a massive 31.16% between 2014 and 2019. 

This is despite having 36.73% of its postcodes in high flood risk areas, as well as 39.90% in medium flood risk areas.

It’s a similar story in Newcastle, where 25.93% of postcodes are at a high risk of flooding.


While rents have grown by a steady 5.91% between 2017 and 2019, in the past five years they’ve soared by 30.60%.

Co-founder of Bunk, Tom Woollard, commented:

“When investing in property you need to do your homework on the area as a whole and not just the local property market. While nature can be unpredictable, buying in an area with a known risk such as flooding can see your financial return wash down the drain as you spend thousands on repairing your property and getting it back to a state that is fit for purpose in the rental market.


Of course, with risk often comes reward and while there is a notable correlation between the risk of flooding and a lower level of rental growth, investing in an area with high tenant demand, such as Cambridge, can still prove lucrative.”

Property

Cost of maintaining a buy-to-let hits £12k a year in parts of the UK

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Leading property management platform, Howsy, has looked at the cost of maintaining a buy-to-let property each year and how this varies across the UK.  

Buy-to-let can be a tricky business if you don’t tackle it properly and there are a whole host of costs that can trip up the amateur investor. From the more obvious additional three percent stamp duty tax, to various other tax implications, void periods, mortgage costs, agency fees, the cost of finding a tenant, and more, Howsy’s previous research shows the average buy-to-let brings an annual return of just £2,000.

With the Government’s continued attack on UK landlords, making the most out of your investment financially can be tough and even when you consider all financial commitments for a property, many can still be caught unaware by out of the blue maintenance and repair costs. 

Buy-to-let landlords should squirrel away savings in anticipation of these events and an industry rule of thumb is an annual budget equivalent to 1% of your property’s value. 

So what does that equate to?  

Across the UK landlords should be tucking away an annual budget of £2,344 to cover repairs and maintenance, with this rising to £4,746 in London, with the North East home to the lowest repair costs at just £1,328. 

Of course, markets with higher rent returns may seem promising from an investment standpoint but the higher the reward, the higher the cost when things do go wrong. In Kensington and Chelsea, this annual 1% saving climbs to an eye-watering £12,292, hitting nearly £9,000 in both the Cities of London and Westminster.  

Outside of London, South Bucks and Elmbridge are home to the most expensive buy-to-let maintenance costs at £6,091 and £6,019 respectively.

Head to the likes of Burnley or Blaenau Gwent however, and this yearly maintenance budget drops to less than £1,000 a year.

Founder and CEO of Howsy, Calum Brannan, commented: 

“The buy-to-let sector can be a minefield for the amateur investor and now more than ever, it’s imperative that you do everything you can to maximise the return on your investment.

While technology now allows a greater level of control and service when managing your investment at a lower cost via online platforms, it isn’t just about the financial side of things. Providing a fit for purpose property is not only a legal requirement but essential to ensure a happy tenancy and a reduction in void periods.

Of course, things can go wrong and having the budget available to fix them is a must. In the worst-case scenarios, a cash pot equal to one percent of your property’s value might not be sufficient, but it should cover you for most eventualities and is a good benchmark to start on.

As with all buy-to-let investments, good preparation, organisation, and education are key, and whether you go it alone or have a great management agent if you stay on top of things, a bricks and mortar investment is still one of the best you can make.” 

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