Forget buy-to-let! Could this property investment’s 6% yields help you to retire rich?

Buy-to-let is still a poor place for your cash despite fresh news about rising rents. Royston Wild thinks you’d be much better off with this property hero instead.

Royston Wild

I am a seasoned freelance financial journalist specialising in global stock markets. I was formerly a stocks and commodities reporter -- and editor of print and online FX market coverage -- at Shares Magazine, providing information and analysis for readers to make sound investment decisions in the UK and overseas. I was also a regular contributor to the magazine's extensive catalogue of bookazines and trading guides. Prior to this I was a reporter with the BaseMetals.com and TheBullionDesk.com newswires, breaking the latest news and providing in-depth analyses of the base and precious metals markets.

Published 10 August, 2019 2:38 pm BST

The content of this article was relevant at the time of publishing. Circumstances change continuously and caution should therefore be exercised when relying upon any content contained within this article.

“The reports of my death are greatly exaggerated.” So quipped Mark Twain upon the erroneous publication of his obituary in a famous New York newspaper, or at least that’s how the legend goes.

If the buy-to-let sector could speak, it could well say the same. Sure, thanks to a mix of tax increases, cost jumps and regulatory changes in recent years, the allure of the rentals market has taken an almighty whack. But investors who are hunkering down and trying to ride out the storm are reaping the benefits of the worsening property shortage.

According to estate agency Hamptons International, the average rent in the UK rose 1.9% in July, with Scottish renters benefitting the most from the growing homes shortfall as rents rose 5.2% year-on-year. Rental growth was also strong in the South West and South East of England, registering at 4.7% and 4% respectively.

The new exodus

Landlords who are riding the rent wave in these places might be particularly quick to dismiss claims that buy-to-let is rapidly dying as an asset class. But there are many others for whom returns from the rentals sector are simply not sufficient, and the aggravation related to increased regulation far too great, to justify their own participation in the sector. Indeed, recent data from the Residential Landlords Association shows that a whopping half of Britain’s landlords are considering exiting buy-to-let completely following government steps to scrap ‘no-fault’ evictions.

So forget about buy-to-let, I say. I would argue that individuals looking to grab a piece of the UK property sector would be far better off investing in Warehouse REIT (LSE: WHR) today.

Watch this space

I probably don’t need to explain how big the e-commerce segment is now, nor remind you of the rate at which online retail activity is growing. But I’d like to briefly mention a recent JP Morgan report, which estimates that internet sales in the UK — a region that accounts for 30% of the whole European e-commerce sector — will grow 9% each year for the next few years and result in a total market value of €231.2bn by 2021.

Clearly, businesses with exposure to the online shopping sphere are onto a good thing, and Warehouse REIT is one such share in great shape to ride this trend through its network of urban warehouses that provides space to retailers and logistics firms. What’s more, the AIM-listed business is engaged in rampant expansion the length and breadth of the country to exploit this exceptional growth opportunity.

I firmly believe that Warehouse REIT could generate some serious returns in the years ahead, but it’s not just a share for those with an eye on retirement riches — a 6% dividend yield for 2019 suggests some big returns in the near term too.