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Buy-to-let rental incomes rise despite shrinking portfolios

Landlords in England & Wales have seen their rental portfolio income increase by 8.7% in the past year, research by agent Benham and Reeves has revealed.

Some landlords are exiting the market, as portfolio sizes have fallen by -5.6% year-on-year, dropping from 9.1 properties to 8.6.

However despite shrinking portfolios, annual portfolio income has increased from £67,304 to £73,186 over the same time period, an increase of £5,882 or 8.7%.

Marc von Grundherr, director of 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.”

On a regional level the biggest income increase was in London. The average portfolio size in the capital has shown the slightest of declines from 7.6 properties to 7.5, but the average rental income per property has soared by 34.7% to £13,095. This means that the annual rental income generated from the average buy-to-let portfolio within the capital has increased by 32.9% and now sits at £98,213.

Despite falling rent values leading to a -7.7% decrease in the income per property, landlords in the East of England have enjoyed a strong portfolio income increase of 32.7%. This is due to a huge increase in portfolio size, rising 6.4 properties to 9.2 in the past year.

Portfolio income has 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%).

In three regions, however, landlords have seen their portfolio income decrease over the past year.

Wales has seen the most significant decrease of -19.2%. This comes despite the average rental income per property seeing the biggest increase of all regions (41.5%), and is therefore being driven by the average portfolio size falling from 12.6 properties to 7.2.

The East Midlands has seen income fall by -11.1%, once again driven by a shrinking average portfolio size, down from 11.8 in 2022 to 7.8 in 2023.

The West Midlands has seen portfolios increase from 8.5 to 9.2, but a drop of -8.7% in income per property means that portfolio income has fallen by -1.2%.