Rents in the UK and the Algarve
The local Algarve newspaper in English has been spinning some peculiar
news. They have an obsession there to present good news, and even if
there isn't any, they must make it up.
I guess there is an argument for disseminating good news rather than
spreading doom and gloom, but I do have this obsession of my own, that
folks deserve the truth. It's not very nice to tell people good news,
and encourage them to enter a market, when they should be warned off.
The latest story is that average rental returns in the UK are a paltry
2.3%, which is, of course, not true, and that rental returns in
Portugal are the second highest in the EU, which is also not true.
(Portugal News 27 July)
My own clients are regularly getting between 7% and 12% returns in the
UK. That's normal. I also checked with several rental agencies I have
agreements with. They all laughed and said they'd be out of business if
returns were as low as the newspaper claims. Not only that, but in the
week following this absurd article I have received a dozen or so emails
offering me deals in the UK that bring in anything from 9% to 12%.
You can check the figures yourself. The regional sales figures from the
Land Registry give figures for june. Then get the rental returns
submitted by rental agencies to their central registry and divide one
by the other. Heck, it's an easy enough sum to do. Here are the results.
Lowest returns are in London at 4.05%, followed by the South East, and
East Anglia. Wales is at 6.18%, similar to the Midlands, while the
returns in the north are higher at just over 7%. All way above the
figure quoted in the Portuguese paper..
This method will give you a lower then real figure because landlords
tend to buy cheaper houses in areas of higher rents which is why the
figures from Zoopla show higher returns than listed above. They are
closer to reality.
Now check how many empty properties there are in the UK and how many
there are in, say, the Algarve. Behind me is a tourist village with
over 100 properties. Only one is inhabited full time. In high season
maybe a dozen have tenants, the rest stay empty year after year. Factor
in all those empty properties up and down the coast, and they are there
in the tens of thousands, and that knocks your average return on
rentals through the floor.
It's the same with hotels. It's bad enough to claim a 23% average
occupancy for winter, which is embarrassing enough for a country with
pretty good winter weather, but when you factor in those 85%+ hotels
which are closed and therefore have 0% occupancy, the real figure comes
in at an appalling percentage.
Dont get fooled. You do have me here to keep at least one foot on the
ground.
I have said this before, but the holiday rental world went splat about
ten years ago when everybody got in on the act. When holiday zones
across the world are full of empty, part completed, and not just dying
apartments, but dying ghettoes, and even across Spain, dying holiday
towns, the spree is over and the champagne has gone flat.
The time is indeed ripe for rentals. There are hundreds of thousands of
people slowly going bust who need tenants all across Southern Europe.
As I said to one of my clients only two days ago, I have been advising
property clients for nearly fifty years and I'm renting. That should
tell you something.
And those of you who want tenants, bring your prices down to €400 a
month and you'll start to find clients. Keep them at £700 a week
and you'll carrying on going broke.
And do remember guys, just because the ads give prices of £700 a
week for rentals doesn't mean that's the going rate. Check out the
rates people are actually paying, not the rates on empty properties.
They are empty for a reason.
john
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