The latest property market analysis by London lettings and estate agent, Benham and Reeves, has taken a look at both the residential and commercial property markets and how both are currently performing for those considering an investment but unsure which path to take.
The analysis shows that when it comes to the initial cost of investing, the average residential property requires a budget of £259,850. However, with an average value of £454,384, a commercial investment will require a budget some 75% larger on average.
Where stock availability is concerned, the residential market also offers up far greater choice with 541,966 listings versus just 12,022 across the commercial space. The value of the market is also more substantial, worth an estimated £251.5bn while the commercial market comes in at almost £9bn in value.
London and the South East rank top for residential stock availability, accounting for 19% of all listings, with the East of England (12%) also seeing a large number.
Those eyeing a commercial investment are better placed investing in the South West and North West, accounting for 12.9% and 12% of all commercial stock respectively. London ranks third with 11% of all commercial properties in the Capital.
While the commercial sector may be smaller in both volume of stock and values it could prove the better option for the individual investor. On average across the UK, a commercial investment will bring a yield of 10.7%, while the average residential property offers a yield of just 3.7%.
Currently, Scotland and the North West offer the highest residential yields at 4.4% and 4.3%, while Scotland is also home to the highest commercial yield at 20.4%, along with the South West (13.7%).
Both regions are also home to the largest gap between the average residential yield and the average commercial yield.
Director of Benham and Reeves, Marc von Grundherr, commented:
“It’s fair to say that both the residential and commercial markets have been impacted by the pandemic and so it’s hard for investors to know where to put their money at present. But tough times can also bring great opportunity and with the country now reopening from both a professional and social standpoint, both sectors are set to see a return to health over the coming months.
There is a plethora of factors to consider from your initial investment level, which sector to choose and the ongoing requirements, capital gains potential, as well as the regional disparities across these sectors in each region of the UK.
While a commercial investment may offer a higher yield, the recovery timeline as a result of the pandemic is set to stretch on far longer than that of the residential rental market and residential property investment remains by far the dominant force where availability, affordability and total sector value is concerned.
However, commercial investment can provide a more hands-off approach for those doing so through a third-party platform, while the amateur buy-to-let landlord is sure to spend more time sorting out tenant issues and so on.
The best approach is a balanced portfolio and one that considers the pros and cons of each market from both a residential and commercial standpoint.”
Table shows the current average asking price, value of the market, number of properties and proportion of total properties across both the commercial and residential markets
Region
Resi number of properties
Resi asking price
Est total value
% of market
Comm number of properties
Comm asking price
Est total value
% of market
London
103,471
£1,048,760
£108,516,245,960
19.1%
1,331
£1,526,731
£2,032,078,961
11.1%
South East
103,293
£454,581
£46,955,035,233
19.1%
1,172
£2,032,700
£2,382,324,400
9.7%
East Midlands
35,842
£275,169
£9,862,607,298
6.6%
780
£972,202
£758,317,560
6.5%
East of England
65,333
£365,714
£23,893,192,762
12.1%
741
£645,600
£478,389,600
6.2%
North East
22,423
£202,181
£4,533,504,563
4.1%
783
£347,866
£272,379,078
6.5%
North West
48,599
£227,049
£11,034,354,351
9.0%
1,438
£429,830
£618,095,540
12.0%
South West
49,629
£403,642
£20,032,348,818
9.2%
1,547
£534,867
£827,439,249
12.9%
West Midlands
36,619
£289,322
£10,594,682,318
6.8%
1,175
£478,938
£562,752,150
9.8%
Yorkshire and The Humber
29,099
£201,512
£5,863,797,688
5.4%
1,152
£330,030
£380,194,560
9.6%
Scotland
25,310
£191,332
£4,842,612,920
4.7%
1,110
£305,749
£339,381,390
9.2%
Wales
21,372
£244,530
£5,226,095,160
3.9%
768
£417,946
£320,982,528
6.4%
Northern Ireland
976
£184,416
£179,990,016
0.2%
25
£396,942
£9,923,550
0.2%
United Kingdom
541,966
£259,850
£251,534,467,087
100.0%
12,022
£454,384
£8,982,258,566
100.0%
Table shows the current average yield across both the commercial and residential markets
Region
Resi asking price
Resi asking rent pm
Resi average yield
Comm asking price
Comm asking rent pm
Comm average yield
Scotland
£191,332
£706
4.4%
£305,749
£5,204
20.4%
South West
£403,642
£1,031
3.1%
£534,867
£6,097
13.7%
Yorkshire and The Humber
£201,512
£633
3.8%
£330,030
£3,549
12.9%
Northern Ireland
£184,416
£277
1.8%
£396,942
£3,605
10.9%
Wales
£244,530
£806
4.0%
£417,946
£3,597
10.3%
West Midlands
£289,322
£810
3.4%
£478,938
£3,692
9.3%
North East
£202,181
£667
4.0%
£347,866
£2,570
8.9%
North West
£227,049
£810
4.3%
£429,830
£3,168
8.8%
East of England
£365,714
£1,057
3.5%
£645,600
£4,377
8.1%
London
£1,048,760
£2,643
3.0%
£1,526,731
£9,681
7.6%
East Midlands
£275,169
£802
3.5%
£972,202
£5,053
6.2%
South East
£454,581
£1,356
3.6%
£2,032,700
£7,848
4.6%
United Kingdom
£302,577
£869
3.4%
£317,890
£5,204
19.6%
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About the Author
Established in 1958, Benham and Reeves is one of London’s oldest, independently owned property lettings and sales agents. With specialism in residential sales, corporate lettings and property management in prime areas of London, the company operates from 19 prominently located branches and 11 international offices.