The impact of low interest rates has had a massive impact on the values of ground rents of all descriptions. It is probably fair to say that ground rent valuations have shot up by well over 50% over the last 5 years as investors look to invest in the ground rent market. They are no longer the preserve of specialist investors as more and more investors look to get involved in this niche market. The returns that can be generated has diminished as prices have increase and yields drop.

The values of ground rents will depend upon the prevailing ground rent and the capacity for those ground rents to increase over time. A building whose ground rents increase regularly will be more valuable that a ground rent that increase every 25 years. We are talking about long leasehold investments with leases of in excess of 100 years. If a landlord is able to manage and insure the block they will also pay a premium for this as they will be able to charge fees for carrying out services such as property management.

The popularity in ground rents has also increased because they are reasonably low risk and can be purchased without the need to raise finance . This removes the need to rely on banks for funding which has been a major issue in recent years. It is possible to borrow money against ground rents but you really need a substantial portfolio providing a good income stream to make them interesting to any financial institution.

Owning a few ground rents reversions can be fairly unpredictable as it is not certain how often yo will be able to charge leaseholders for lease extensions. However a large ground rent portfolio will see more regular income from lease extensions.