There have been a number of reports in the press recently of a downturn in buy to let, promted by rising interest rates and ever-increasing property prices. There have also been reports of an increase in the number of landlords leaving the market to cash in on their property investments.
However, according to Leaders one of the UK’s largest independently owned letting specialists â buy to let is still a sound investment in the long term, and landlords who are choosing to sell up now are creating many excellent opportunities for those considering entering the market or those planning to increase their existing portfolios.
Says Leaders managing director, Paul Weller: a significant number of the landlords who are choosing to sell at this time are doing so because they have held their property investments for many years and want to realise their capital gains, selling now in order to avoid the impact of the forthcoming HIPPS legislation.
Whilst there can be no doubt that potential rental yields are smaller than they were a few years ago when house prices were lower, we believe there is still a great deal in favour of buy to let as an investment.
Leaders points to the fact that demand for rented accommodation has been consistently strong for many years and is now significantly outstripping supply. All of Leaders 31 branches report significantly higher demand from tenants than properties available, and ARLA’s latest survey showed that in the 3 months to May, the number of letting agents reporting the same situation rose to the highest level ever.
Says Paul: “Bearing the strength of demand in mind, along with capital appreciation and the fact that average rents in the areas we cover have increased steadily over the last year, we believe that buy to let is still a very worthwhile investment, even if yields are slightly lower.”
However, he warns, it is now more important than ever that investors are prudent, take the long term view and seek professional, specialist advice on where to invest and what type of property to invest in. Our branch managers, who know their local markets inside out, report that there are still many excellent opportunities available for investors in their areas, but, as always, there are also certain areas and property types that are best avoided in the current market.
As well as its own experience of the market through its network of branches across the South East, Leaders cites other research recently carried out to support its view:
A survey of nearly 5000 landlords by Mortgage Express has revealed continued confidence in the buy to let market, with 88% per cent of landlords planning to increase or maintain their property portfolio, compared to 86% at the same time last year. And according to a recent survey by Bradford and Bingley, residential rental incomes are set to grow due to the influx of immigrants and the continued difficulty of getting on the property ladder.
Says Paul: “Another fundamental point in favour of buy to let as a long term investment is that property has massively outperformed the stock market over the last decade and, looking forward, house prices would only have to rise by 1.6% a year over the next 10 years to produce the same returns as equities before costs.” This seems very likely given that in prime locations in the UK there is a limit on new development whilst demand as a result of population growth is set to rise.
“As some landlords are now selling up to realise their capital gains, they are creating more space in the market and exciting oportunities for new investors,” says Paul. “We believe landlords can still do very well, provided they take a long term view and seek specialist advice in choosing and managing their property investments.”
Leaders has been specialising in the letting and care of rented property for almost 25 years and is a fully bonded member of the Association of Residential Letting Agents (ARLA). For more information about letting or renting in your area, please visit www.leaders.co.uk
Established in 1983, Leaders has 31 branches and is a fully bonded member of ARLA. The company has built its reputation on providing a friendly, reliable and professional service and as a result remains the first choice for thousands of landlords and tenants across Sussex, Surrey, Berkshire, Hampshire and Dorset. For more information please visit www.leaders.co.uk