Rental Yields in Slough
Understanding the rental yield you’re receiving is one of the keys to measuring the long-term success of a location or property type. By using the rental income and the value of your property – arguably two of the most important measurements for investors – you can discover your investment’s long-term potential.
In the South-East, yields are benefitting from London’s slow growth recovery. While prices (and rent) in the capital remains expensive, tenants continue to relocate in the hopes of finding a more affordable lifestyle. One of the most popular areas for relocators is Slough, a commuter town that is building incredible foundations for the future.
As a quick example, London rental yields are sitting at around 2.90% heading into 2022 but the South East as a whole has seen rents rise by 4.6% over the last year, contributing to higher yields. This is because property in the South East is much more affordable yet can still command a relatively high rental price. But what about particular towns? What are the rental yields in Slough in 2022?
Average Rental Yields in Slough
Slough – an established hotspot for London workers searching for affordability – is driving the demand that contributes to higher yields.
Through a combination of inward investment from local government, brand new amenities springing up around the town and the ‘London Exodus’ we mentioned above, Slough is experiencing a wave of new tenants entering the market.
This is naturally pushing up rental prices and thus, rental yields. On average, rental yields in Slough heading into 2022 are currently 3.70%, outperforming London and the UK average.
Looking ahead, rents are expected to rise. According to JLL research, the South East can expect rental prices to increase by 8% in the next five years, despite early challenges in 2021 posed by the pandemic.
Similarly, Savills predict that the South East could see property price growth of 19.1% going forward, which would have a knock-on effect for rental prices, especially in a competitive market.
With Crossrail on the horizon, there’s no reason to suggest these increases won’t be higher than forecasted. Transport links are a key aspect of tenant demand and can often put a premium on nearby properties, which will naturally increase yields.
Best Property Type in Slough
If you’re a Buy-to-Let investor, you’ve no doubt asked yourself: what is the best property type for rental yield growth?
New data from lettings management platform Howsy has shown that two-bed properties offer the best returns with an average yield of 4.8%, compared to the 4.1% offered by a one-bed property and the 4.5% offered by a three-bed property.
It’s important to remember with these figures that this is for a gross yield, not a net yield. Running costs would need to be factored into your investment and would obviously change depending on size, the amount of properties or even the strategy you employ i.e. a property with multiple occupants versus a single-let.
However, they do offer a good baseline for past performance across the UK.
Property Prices in Slough vs Rental Yields
Below you can see a breakdown of the average property prices in Slough versus the rental yields that they’re currently achieving heading into 2022.
|Type||Avg Price||Rent (m)||Rent (p.a)||Yield|
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What is driving Slough rental yields?
Slough is exciting for investors because it’s a prime example of an emerging market with consistent future demand.
It’s proximity to London means it will always be an alternative for those seeking a more affordable living condition and the improvements it’s making to its transport links only reinforces this benefit.
The introduction of Crossrail has already driven prices up across the Commuter Belt, with properties near any of the proposed 40 stations rising by 66% on average between 2010 and 2017.
At the same time, many locations along the Crossrail line already have plenty of stock to meet rising demand, yet towns such as Slough are still facing an undersupply – particularly in 2-bed properties according to OnTheMarket – which is underpinning the expected growth of rental yields in Slough in 2022.
While both Brexit and the pandemic have had a clear short-term impact on prices in 2021, it’s not a stretch to consider that Crossrail may support and even kickstart greater demand across the South East. If history is any indicator, the completion of Crossrail may offer a localised boost in prices as investors finally complete on investments they’ve been considering during the build phase.
Avoid the Voids – What Will Affect Your Rental Yield?
Rental yield is one of the most sensitive metrics in any property investment as it can be driven by a multitude of factors.
As you’d imagine, yields are incredibly dependent on surrounding demand and the popularity of your chosen market. This makes proper research key. You should always perform your due diligence with any potential investment and consider not just current demand/yields but what may happen in the future.
Things to look out for? Nearby career opportunities that may attract new waves of tenants, potential redevelopments, residential undersupply that will support increased demand and connectivity with other popular markets.
Likewise, consider your chosen tenant demographic. Having an idea of the type of tenant in the immediate area can help you adapt your strategy accordingly – after all, there’s no point looking for a student-led HMO in an area with no universities nearby.
Similarly, if you’re targeting young professionals, you’ll want a market that supports job opportunities and an excellent nightlife. This is partly a reason for Slough’s success – with such a strong economy, easy access to London’s nightlife and big businesses on every corner, it’s ideal for those that want somewhere to live within walking distance of the office.
If you want to mitigate issues further down the line? Consider developing a ‘rainy day’ fund. By using excess rental profits you can create a fund to tide you over during any void periods. Voids can be incredibly damaging, especially over a portfolio, so having this safety net can be a lifesaver for many investors.