In­vestors urged to ‘look north’ for let­tings po­ten­tial

Land­lords are be­ing ad­vised to broaden their hori­zons but they had bet­ter do their home­work and abide by the new rules. Sharon Dale re­ports.

Yorkshire Post - Property - - PROPERTY -

AT the height of the prop­erty boom, land­lords from across the coun­try piled their money into North­ern ter­race houses and flats.

Now, af­ter a five-year hia­tus caused by the credit crunch and fall­ing prices, buy-to-let is back.

Those look­ing for rental prop­er­ties, in­clude savers dis­il­lu­sioned with low in­ter­est rates and peo­ple search­ing for an in­vest­ment to fund their re­tire­ment.

Buy-to-let loans, scrapped in the re­ces­sion, are fund­ing their am­bi­tion and this com­bi­na­tion of cash and de­mand has sparked a clar­ion call for South­ern in­vestors to “look north”.

Prop­erty in­vest­ment spe­cial­ist As­setz says ris­ing prices and a lack of sup­ply has made Lon­don and the South East less af­ford­able and less lu­cra­tive. So it is ad­vis­ing buy­ers to look to “eco­nom­i­cally sound” sub­urbs clus­tered round thriv­ing cities in York­shire and the North West, where homes are cheaper and rental yields are higher. As­setz’s lat­est re­port re­veals that the typ­i­cal gross rental yield in Lon­don is four to six per cent, while up North it is seven to 10 per cent.

As­setz CEO Stuart Law said: “Prop­erty in­vest­ment has be­come main­stream again in the last year and, with in­ter­est rates so low, peo­ple can­not see a down­side to buy-to-let. How­ever, we are now at a crit­i­cal point where prop­erty prices will start to rise faster than rents; this will hap­pen first in Greater Lon­don, which has seen tremen­dous price in­creases in re­cent months.

“In­vestors who are keen to not miss out on prop­erty price growth and stun­ning yields, cur­rently achiev­able in the rest of the coun­try, ought to in­vest there now.

“In the cur­rent cli­mate, by in­vest­ing in the North, it is dif­fi­cult to lose out. Prop­erty prices are yet to ex­pe­ri­ence the head­line-in­duc­ing giddy heights of Lon­don and the South East, but it is im­por­tant to fo­cus in­vest­ment on the in-de­mand city cen­tre and sub­urbs clus­tered around cities like Manch­ester, Leeds, Birm­ing­ham and Liver­pool where em­ploy­ment is high.

“The po­ten­tially lu­cra­tive yields of the North are now start­ing to en­ter many land­lords’ con­scious­ness. The savvi­est in­vestors will start to look away from Lon­don and head north to re­ally make their money work.”

The ad­vice has sparked fears of another buy-to-let boom, which could see first-time buy­ers com­pet­ing with cashrich in­vestors and a rise in unscrupulous prop­erty clubs that prom­ise a fast buck for would-be land­lords.

Will Linley, of York­shire let­ting agency Linley and Simp­son, be­lieves a boom is a long way off, and he wel­comes new land­lords.

“We have a lack of sup­ply. Our branches have an av­er­age of 12 ap­pli­cants for ev­ery one prop­erty. The hous­ing mar­ket crash of 2008 af­fected con­fi­dence so badly that peo­ple who could’ve bought to let did not.

“Over the last few months, we have seen more am­a­teur in­vestors com­ing to the mar­ket and they tend to be 50-plus cash buy­ers, which is great.

“We hope there will be a grad­ual up­lift in con­fi­dence in the prop­erty mar­ket and that more in­vestors will come back. We also hope that they won’t fo­cus solely on the cap­i­tal growth you get from ris­ing prices. We want them to look for sen­si­ble rental yields and in­vest for the long term.”

Gra­ham Bates, chief ex­ec­u­tive of Ed­dis­ons Res­i­den­tial, agrees and adds that South­ern­ers have long looked to the North for a bar­gain, though he has a stark warn­ing.

“If you are in­ter­ested in rental yield it makes sense to buy here but it’s vi­tally im­por­tant that peo­ple don’t get car­ried away with rock bot­tom prices. If you buy a cheap, poor-qual­ity prop­erty in a poor area it could be fraught with prob­lems. You’ll have high main­te­nance and other is­sues. Even if it was on your doorstep it would be a prob­lem, never mind if you are in Lon­don.”

Mr Bates, a sea­soned in­vestor him­self, stressed that re­mote land­lords need to look at a prop­erty be­fore they buy.

“In­come from the rental yield is im­por­tant but so is the qual­ity of the as­set. The num­ber one mis­take is buy­ing a prop­erty with­out look­ing at it.”

He added that would-be land­lords should in­ves­ti­gate rental po­ten­tial and make sure they have sub­stan­tial de­posits if they need a mort­gage.

“Another mis­take in the boom is that peo­ple were get­ting buy-to­let mort­gages with a 15 per cent de­posit and that’s not enough. I think you need a min­i­mum of 40 per cent, es­pe­cially if you are a novice. That gives you a cush­ion for voids and re­pairs. Peo­ple should also know that prop­erty is not an arm­chair in­vest­ment. You have to keep your fin­ger on the pulse.”

If you fol­low th­ese rules, Mr Bates be­lieves you can look for­ward to a good re­turn.

Al­though some of those forced to rent will now buy, the buoy­ant let­tings mar­ket is here to stay.

“There are still af­ford­abil­ity is­sues for first-time buy­ers,” he said. “Plus more peo­ple are get­ting di­vorced and we have a grow­ing pop­u­la­tion. The fun­da­men­tals are there. Rent­ing is here to stay.”

Fol­low Sharon Dale on Twit­ter @Prop­er­ty­Words

FAB­U­LOUS LO­CA­TION: Hornsea Mere is on the doorstep of this light-filled 1960s house; the prop­erty has five bed­rooms and a gar­den that is a haven for wildlife with visi­tors in­clud­ing pip­istrelle bats, squir­rels, snakes frogs and newts.

BOUNC­ING BACK: Buy-to-let is on the in­crease but ex­perts in the sec­tor ad­vise in­vestors to make sure that they choose prop­er­ties wisely.

Newspapers in English

Newspapers from UK

© PressReader. All rights reserved.