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Good news for landlords - rental homes enjoy huge capital appreciation

When it comes to being a landlord, there are two main things you are likely to consider before investing in a home – its potential rental yields and its price growth over time (known as capital gains or capital appreciation), with the latter important if a landlord ever wants to sell the home on in the future for a profit.

Well, recent research from Nationwide could provide positive news for landlords on this front. According to the building society, annual house price growth has risen to 12.6%, a jump from 11.2% in January and the strongest pace since June last year.

What does the index show?

Nationwide’s recent index shows that house prices have gone up by 1.7% month-on-month, after taking account of seasonal effects, the seventh consecutive monthly increase.

Nationwide chief economist, Robert Gardner, explains: “The price of a typical home rose above £260,000 for the first time in February, an increase of £29,162 over the past 12 months. This is the largest ever annual increase in cash terms since the start of our monthly index in 1991. The price of a typical home is now £44,138 or 20% higher than in February 2020 - the month before the pandemic struck the UK.”

Gardner points out that ‘mortgage approvals continuing to run above pre-pandemic levels at the start of the year.’ He also cites a mix of strong demand and limited stock of homes on the housing market as contributing factors to house prices rising.

What is capital appreciation and why is it important for landlords?

Capital appreciation, also known as capital growth and gains, describes how much a property will increase in capital value over time. This is an important consideration for landlords as this could be how much they could get from their rental property if they ever plan to sell it.

With house prices rising and properties across the country experiencing an increase in capital appreciation, this can put landlords in an enviable economic position.

London, where we are based, experienced a house price inflation jump of 5.4%, its strongest level since the end of 2020. Due to the capital being the country’s business and cultural hub, it will always be a magnet for renters and has the potential to be a worthwhile investment for landlords.

The Docklands, where we have one of our main offices, in particular is known for being home to the country’s biggest financial institutions, making it popular with professionals. The Docklands also boasts an array of attractive architecture and has a thriving community, making it an attractive prospect for tenants.

Despite external factors such as rising inflation, the war in Ukraine and Covid, the market is expected to remain buoyant in the coming weeks and months, which will be welcome news to any landlords considering selling one of their homes.

For those with one eye on long-term capital gains, London is the place to be, with prices in the capital rising significantly over recent years and expected to continue doing the same, especially in areas that aren’t in prime or super-prime London.

Here at Holland Properties, we have been an established estate and letting agent since 1999 and can help to manage your tenancies, allowing you to get the most from your rental properties as a result. We operate in Docklands and the surrounding areas including Surrey Quays and Rotherhithe.

For further guidance on any part of the lettings process, please contact us today. You can also request a free and instant online valuation to see how much rent you could be charging in the current marketplace.