Investor costs and returns in the English private rented sector

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Ball, Michael (2016)
  • Publisher: University of Reading

Financial returns in the English private rented sector should be central to examination of its performance but robust estimates are scant. Here, the results of a simulation exercise based on a discounted cash flow investment appraisal are reported. Returns on own capital are estimated for 10-year long residential property investments made in successive years from 1996 to 2015. They suggest that, once costs, taxes and variability are taken into account, landlords’ returns are far more modest than is often believed and are worse for those that borrow and who pay higher rates of income tax. Some implications for the sustainability of the current size of the private rented sector are discussed, where it is concluded that investor behaviourial motives are important but that the sector may be vulnerable to a sustained market shock.
  • References (8)

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