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Buy-to-let: UK property investment hotspots in 2019

Experts reveal the five places where landlords and property investors could make a tidy profit this year.

With Brexit looming the prospects for the UK property market are even trickier to predict than usual in 2019.

But for those looking to invest in buy-to-let next year, experts believe there are a number of areas that could prove profitable whatever happens at Westminster and in Brussels.

Nottingham

According to the latest figures from Nationwide, the East Midlands property market experienced the second-highest growth rate in the country in the year to September.

On top of that, a student population of almost 40,000, many of whom want to live centrally, means there are plenty of potential tenants.

UK property

“Property prices in Nottingham are lower than the national average while the rental market is strong, making it a lucrative spot for landlords,” says Rob Bence, co-host of The Property Podcast.

“There are also a lot of planning applications currently being considered for major developments in the city meaning 2019 could be an exciting year for it. It’s currently under the radar for property investors, but I don’t expect that to last.”

Recent research by credit report specialists TotallyMoney showed two Nottingham postcodes were in the top five in the country for buy-to-let yields. NG1 in the city centre was the highest rated with an average yield of 12%. NG7 was in fifth place with almost 9%.

South Wales

Swansea and Newport in South Wales could both be hotspots in 2019, according to independent property strategist and investor Mike Frisby.

“Swansea is doing well because it’s always been affordable, yields are good there and demand is picking up,” he says.

UK property

Meanwhile, the recent scrapping of the toll on the Severn Bridge crossing between England and Wales could have a big effect in Newport.

“Getting rid of that charge will make Bristol commutable from Newport and it should lead to a big boost in demand,” Mike says.

The latest figures back up that view too. A recent Housesimple report showed property prices in Newport have risen by, on average, more than 8% in 2018.

“Cardiff is also doing well as a city but properties there are a bit pricier than in Swansea and Newport,” adds Mike.

Edinburgh

Recent figures from Zoopla show that properties in Edinburgh are the fastest selling in the country, taking just 22 days on average to shift.

The city’s housing market is buoyant with opportunities, according to the experts, in a number of areas.
Malcolm Leslie, Director of Residential Agency at Strutt & Parker says: “In terms of buy-to-let the Edinburgh market has been exceptionally strong over the last two years and a lot of that is driven by Airbnb.

“There can be spectacular returns for people investing for that reason. A really good property off the Royal Mile can yield spectacularly. And it’s all year round.”

UK property

But it’s not just about being close to the main tourist attractions and renting on a short-term basis.

“There are new developments going on in the east of the city in the old St James’s Centre,” says Malcolm. “That will pull values up in the east end and anywhere accessible to that.

“There is also regeneration going on in Haymarket in the west end. One area there, Dalry, looks like a very good place to invest.”

Liverpool

Liverpool’s property market was on course to reach a value of £1bn in 2018 and the total spent on house sales has more than doubled since 2012.

That’s according to a report, from property data and technology provider Search Acumen, which found the average house price among Liverpool residents has risen by almost £21,000 in five years, around 16%.

UK property

Rob Bence says: “Liverpool has seen huge investment over the last few years and there are several major development projects underway that will have a massive impact on the city.

“There’s a strong student population thanks to the city’s four universities and the city centre has been given a new lease of life in recent years and now boasts one of the most impressive food and drink scenes in the region, if not the country. Prices are rising but it’s still possible to grab hold of a bargain and achieve a strong yield.”

Birmingham

Birmingham is the UK’s second biggest city but it has lagged behind its competitors in recent years in terms of property price growth. The latest figures suggest that might be changing, though.

Official figures show Birmingham was the number one destination for people relocating from London last year, with over 7,000 making the switch.

UK property

“HS2 is being built to provide high-speed transport links from London and the local economy is strong,” says Mike Frisby.

“Also, a number of head offices have relocated to Birmingham from London and that means there are good job prospects and increased demand for housing.”

It’s not just Birmingham that could do well in that area either.

Mike says: “The whole of the Midlands is looking good because there are an awful lot of distribution warehouses being built and houses springing up nearby. That’s also creating demand for rental properties.

“The affordability there is good too because those areas can be cheaper than elsewhere, particularly in comparison to wages.”

Source: Love Money

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Is buy-to-let property a better investment than stocks?

Buy-to-let property has historically been a very popular for British investors. And in the past, they’ve generally done well from BTL, profiting from both house price appreciation and solid rental yields.

But is investing in a buy-to-let property a better idea than investing in the stock market? Right now, I’m not so sure. Here’s a look at four reasons stocks beat BTL as an investment in the current market environment.

Higher income

With UK property prices having soared in value over the last decade, the rental yields on offer from BTL properties are generally quite low at present. This is because rent prices haven’t kept up with property prices. While it’s still possible to find hot spots that do offer high rental yields if you do your research, the average nationwide rental yield is just 3.6% at the moment, according to insurance specialist Direct Line.

With stocks, you can potentially pick up a yield that’s significantly higher than that with much less effort. As I detailed here, it’s not that hard to put together a simple blue-chip portfolio that yields around 6% at present. Furthermore, if you invest within an ISA, that income will be tax-free. A 6% yield tax-free for doing nothing? That a no-brainer to me.

Less hassle

Another key advantage that stock market investing has over BTL property is that it’s significantly less hassle. With stocks, you can invest in a portfolio and then leave it to work for you. Essentially, you’re letting company management do all the hard work while you spend your time doing what you enjoy.

However, with BTL property there’s a whole lot of things that need to be taken care of. For example, you need to ensure that your property is always tenanted (with good tenants). If your property is without tenants for a few months, or your tenants don’t pay the rent, you may have to fork out the mortgage payments yourself. You also need to make sure all repairs are sorted out promptly. And don’t forget all the new BTL regulations that is making life more stressful for landlords, such as minimum energy ratings. In short, BTL is a lot of effort.

More liquidity

Another benefit of stocks is the liquidity that they offer. If you want to take some profits off the table and free up cash, you can. Hit the sell button and your money will be in your bank account within days. The same can’t be said for property. You can’t just sell one bedroom, can you? If you do want to sell your property, you’re looking at a lengthy process and a load of fees.

Better diversification

Lastly, stocks allow you to spread your money out more effectively than property does. With a BTL property, you’re putting all your eggs in one basket. What happens if UK property prices tank as a result of Brexit? In contrast, with stocks, you can invest in many different companies, sectors and geographical regions, and this can help lower your investment risk.

Buy-to-let property has been a good investment in the past, but with low yields on offer at present and new regulations making life more difficult for landlords, the asset class is losing appeal. In my view, a long-term investment in the stock market could be a better idea.

Source: Yahoo Finance UK

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Buy To Let Landlord Profitability Up In Third Quarter

Landlord profitability rose in the third quarter of this year, as buy to let property investors settled down with their portfolios.

The latest quarterly BM Solutions/ BVA BDRC Landlords Panel found that nearly nine out of ten landlords (88 per cent) reported a profit on their buy to let property portfolios in the last quarter, a rise of 2 per cent from quarter two.

Continuing the positive outlook, landlords are feeling slightly more upbeat when it comes to the near-term prospects for rental yields, the UK private rental sector and their own letting business compared to the third quarter of last year.

Average rental yields actually dropped during the third quarter from 6.2 per cent to 5.9 per cent. However, this followed a rise of 0.4 per cent in the second quarter.

The highest rental yields were enjoyed by landlords operating in the North West and Wales at 6.7 per cent and 6.3 per cent respectively. Rental yields are the lowest in Central London at an average of 5.3 per cent and Scotland at 4.7 per cent.

Tenant demand has also increased to the highest level since the second quarter of 2017, with Central London in particular seeing a 9 per cent rise in the proportion reporting increasing demand for rental properties and a 14 per cent fall in the number of landlords who feel that demand has decreased in the last three months.

The number of landlords increasing rents increased slightly to around a third, and the number intending to increase rents in the next six months was also up from 24 per cent to 27 per cent.

Head of BM Solutions, Phil Rickards, commented: ‘Despite many recent challenges to the buy to let market, it’s encouraging that more landlords have made a profit from their buy to let properties this quarter, and that landlords are feeling slightly more upbeat when it comes to the near-term prospects for rental yields, the UK Private Rental Sector (PRS) and their own letting business compared to Q3 last year.

‘For those speculating about the future of buy to let, the figures supporting tenant demand should help to dispel this myth.’

He continued: ‘Considering the much talked about shortage of housing supply, it is vital that we continue to support a healthy Private Rented Sector and with tenant demand scores improving, or remaining stable across all UK regions, it is clear that the PRS still has a very important part to play.’

Source: Residential Landlord

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4 reasons you don’t want to touch buy-to-let property right now

Buy-to-let property has historically been a very popular investment here in the UK. And that’s no surprise when you consider that in the past, BTL property owners could pocket passive income from rent, write off mortgage interest as a tax expense and, of course, profit from house price appreciation. Many investors viewed BTL investment as an alternative to a pension.

However, the landscape has changed dramatically in recent years due to taxation and regulatory changes, and the outlook for property as a long-term investment is a lot less certain now.

Here’s a look at four reasons why buy-to-let property may not be a great investment at the present time.

Low rental yields For starters, rental yields are quite low at present. This is due to the fact that house prices have skyrocketed in recent years and rental income has not kept up. While it’s hard to get an exact figure on current UK rental yields, research from insurance specialist Direct Line recently concluded that the nationwide average yield is around 3.6%. Of course, some areas will offer rental yields that are much higher than that, yet when you consider that you could easily pocket that kind of yield from a portfolio of stocks or funds, you have to ask yourself whether it’s actually worth the hassle of investing in property for that level of yield.

Falling property prices Then, you have to think about potential property price weakness as a result of Brexit. There’s no doubt property prices have fallen across many areas of the UK in the last year (London prices have fallen in each of the last five quarters) with buyers unprepared to meet sellers’ asking prices. Yet prices are still very high when you look at price-to-wage multiples. Could prices weaken further? I think it’s certainly possible.

Stamp duty Next, consider the stamp duty that you’ll need to pay to purchase a buy-to-let property:

Bracket Standard rate Buy-to-let/second home rate (1 April 2016)
Up to £125,000 0% 3%
£125,001 – £250,000 2% 5%
£250,001 – £925,000 5% 8%
£925,001 – £1.5m 10% 13%
Over £1.5m 12% 15%

There’s no denying those stamp duty rates are off-putting. For example, a £300,000 BTL property will set you back £14,000 in stamp duty.

Increased regulation Lastly, don’t forget all the new buy-to-let regulation that’s making life more difficult for landlords. For example, rental properties with new tenancies or renewed tenancies are now subject to minimum energy ratings, with landlords liable for big fines for renting out properties that don’t meet the new regulations.

Putting this all together, it appears that buy-to-let isn’t the automatic ticket to wealth that it once was. So what’s a good alternative?

Fantastic long-term returns To my mind, the stock market remains one of the easiest, and hassle-free, ways of generating long-term wealth.

While many people see stocks as risky, over the long-term the figures speak for themselves. For example, had you invested £10,000 in the FTSE 100 index back in August 1987, by August last year it would have grown to £106,000 when dividends were reinvested, representing an annualised gain of 8.2%.

When you consider that with stocks, you don’t have to worry about things like bad tenants, property repairs, or minimum energy ratings and that you can also spread your money over many different investments to lower your risk, stock market investing definitely has appeal. In my view, it’s a great alternative to buy-to-let.

Source: Investing

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Revealed: The best student buy-to-let hotspots

Analysis from Zoopla has revealed the best and worst performing university town rental locations by gross rental yield, and how quickly this income could cover the cost of three years’ tuition fees (£27,750). Scotland is home to the most student rental hotspots with half of the top 10 performers located there. Top of the list is its capital, Edinburgh, with a gross annual yield on a four-bedroomed property currently standing at 6.59 per cent (£2,216 a month). Parents investing in a buy-to-let property here for their student children could fund three years’ worth of tuition fees in just 17 months.

Following Edinburgh is neighbouring Glasgow, where parent investors could receive an average monthly rent of £1,425 (6.49 per cent), covering three years’ tuition fees in just over two years (26 months).Stirling swiftly follows with a gross yield of 5.76 per cent (£1,382 monthly rent – 27 months) on four-bedroomed properties.

Elsewhere, the media hub of Salford places fourth with an annual yield of 5.66 per cent (£1,394 monthly rent) – tuition fees in the north west-based city could also be covered within 27 months. Heading across to Northern Ireland, Belfast, home to Queens University places fifth, providing an annual income of 5.64 per cent. However, it would take over three years to finance the cost of tuition fees (37 months) due to relatively low rental prices when compared to the rest of the UK.

At the other end of the scale, university towns towards the south of the country are the worst-performing. Kingston-Upon-Thames is bottom with an annual yield of just 2.81 per cent; nevertheless, it could take just 15 months to fund the cost of tuition fees with the average monthly rent (£2,438). Hatfield, home to the University of Hertfordshireplaces second at 2.88 per cent (22 months), followed by High Wycombe (3.02 per cent, 25 months) and Stoke on Trent (3.13 per cent, 52 months).

Taking a holistic view, the average yield from a four-bedroomed property in a UK university town currently stands at 4.27 per cent with an average monthly rent of £1,725 – meaning such an investment could fund the cost of tuition fees in 27 months.

Lawrence Hall, spokesperson for Zoopla, comments: “This research presents an interesting analysis for investors looking to capitalise on the student rental market. Parents keen to help their children though the high costs of university may consider the value of buying a property in a student town. It also comes as little surprise that with the slowing growth in the property market in the south, buy to let investors in the north can get the highest proportional rental returns”.

Source: London Loves Business