Buy to Let in the UK Still a Lucrative Pursuit
Parmdeep Vadesha
September 16, 2008
Buy to let has always been considered an important source of stability in an unsure housing market. Yields have remained appealing on top of a healthy tenant demand that has led to investors holding on to their properties and likewise looking for more lucrative buys. According to Your Mortgage, the average portfolio gearing is below 40% thus presenting landlords with the opportunity to free up equity for more investment.
Even with a slow housing market, many property investors remain undaunted knowing that buy to let investments are counter-cyclical. With the majority of first-time homebuyers holding off on their purchases, tenant demand has risen thus presenting buy to let investors with a healthy demand for rental property.
Increase in tenant demand
According to Your Move, there has been a sharp rise in demand for rented accommodation in the UK property market. The estate agent reports a 38% increase upsurge in lease commencements. Your Move declares that landlords today have seen the strongest demand in decades following news of a decline in property purchases since late last year. The agent also states that the rise in tenant demand is brought about by young buyers who have been driven out of the property market due to the unavailability of easy financing, specifically 100% and 95% mortgages.
Over the past few years, an increasing number of people have entered the market and taken to investing in buy to let properties as a long-term prospect to generate an income and as an effective way to secure their financial future.
Two main benefits of a buy to let investment
While owning a buy to let property presents a number of advantages, the two chief ones are rental growth and capital appreciation. A rise in rent automatically provides landlords with greater income. In addition, buy to let properties have the potential for long-term capital growth.
Potential rental income from buy to let properties
Prior to taking into account the entire expenses involved in letting, the gross return of an investment property should be from 7% upwards. For capital appreciation, returns are likely to tie in with (if not exceed) inflation rates for the near future. In order to cover all possible expenses, the rents that a landlord receives should be around 130% of the monthly mortgage repayment (as a minimum).
Buy to let as a long-term investment
A buy to let property should be perceived as a long-term investment and not an undertaking that´s for a short-term period only. The majority of investment experts are of the belief that investors should look at a span of 5-10 years before they start reaping reasonable returns on their investment. During booming periods when the market conditions are right, property investors tend to enjoy very high capital growth in a short space of time. However, there is always a likelihood that property prices will decline as they do every fifteen years or so.
Industry experts predict a stable future for buy to let. But as with any type of investment, entering the market should be preceded by good financial advice prior to purchasing a buy to let property.
Even with a slow housing market, many property investors remain undaunted knowing that buy to let investments are counter-cyclical. With the majority of first-time homebuyers holding off on their purchases, tenant demand has risen thus presenting buy to let investors with a healthy demand for rental property.
Increase in tenant demand
According to Your Move, there has been a sharp rise in demand for rented accommodation in the UK property market. The estate agent reports a 38% increase upsurge in lease commencements. Your Move declares that landlords today have seen the strongest demand in decades following news of a decline in property purchases since late last year. The agent also states that the rise in tenant demand is brought about by young buyers who have been driven out of the property market due to the unavailability of easy financing, specifically 100% and 95% mortgages.
Over the past few years, an increasing number of people have entered the market and taken to investing in buy to let properties as a long-term prospect to generate an income and as an effective way to secure their financial future.
Two main benefits of a buy to let investment
While owning a buy to let property presents a number of advantages, the two chief ones are rental growth and capital appreciation. A rise in rent automatically provides landlords with greater income. In addition, buy to let properties have the potential for long-term capital growth.
Potential rental income from buy to let properties
Prior to taking into account the entire expenses involved in letting, the gross return of an investment property should be from 7% upwards. For capital appreciation, returns are likely to tie in with (if not exceed) inflation rates for the near future. In order to cover all possible expenses, the rents that a landlord receives should be around 130% of the monthly mortgage repayment (as a minimum).
Buy to let as a long-term investment
A buy to let property should be perceived as a long-term investment and not an undertaking that´s for a short-term period only. The majority of investment experts are of the belief that investors should look at a span of 5-10 years before they start reaping reasonable returns on their investment. During booming periods when the market conditions are right, property investors tend to enjoy very high capital growth in a short space of time. However, there is always a likelihood that property prices will decline as they do every fifteen years or so.
Industry experts predict a stable future for buy to let. But as with any type of investment, entering the market should be preceded by good financial advice prior to purchasing a buy to let property.
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