Commercial insurance article archive
Buy-to-let boom continues
Property investors looking into buy-to-let schemes will be pleased to know that the market is continuing its upward trend, with research from various buy-to-let indices claiming that the first quarter has been one of the strongest for years.
February was an especially strong month, with yields, property values and rents all recording a well-needed boost. Investors saw rents rise by 6.39 per cent over the three months from November to February, with rental yields increasing from £9,954 to £10,590.
Property values in this period also increased and the average property price now paid by landlords stands at £163,417, with values increasing by 5.72 per cent in the first quarter. Regionally, yields in England and Wales currently stand at 6.48 per cent, which is up from February's statistic of 6.45 per cent.
"Increasing yields, rents and property values are only part of the positive story surrounding the buy-to-let market. The beginning of 2005 was relatively slow, but activity picked up in the second half of last year and 2006 has seen momentum gather and investor confidence grow," comments managing director of Paragon Mortgages, John Heron.
For those looking at investing in buy-to-let property in the long-term, experts are warning that investment relies heavily on house price inflation as many investors look to sell their properties and move on after a number of years. In addition, the recent rise in house prices across the country means that more people will be looking to the rented sector for their accommodation.
It is thought that it is this tenant demand which is the main factor contributing to rising rental income, which in turn has increased yields. Statistics from the Royal Institution of Chartered Surveyors (Rics) reveal that tenant demand has increased by 24 per cent in the last three months, which is the biggest increase in the last four and a half years.
Experts believe there are a number of factors that have combined to push up tenant demand in the UK. These include a social shift, which means that more and more people are wishing to or are forced to move into rented accommodation because high house prices are restricting them getting their first foot on the property ladder.
"The number of households in the UK is growing steadily. Many of these new households will not be able afford to buy their own home and will be reliant on rented accommodation," Mr Heron continued.
"This will ultimately lead to an increase in the demand for rented accommodation which is good news for the buy-to-let market," he concluded.
Regionally, some six out of ten regions in the UK saw increases in rental yields during February. The East Midlands was the area that saw the greatest increase in yields, from 6.22 per cent at the end of 2005 to 6.65 per cent in February. Less significant rises were seen in the south-west, the south-east, Yorkshire, Wales and the West Midlands.
This month has seen a series of new rules introduced by the Office of the Deputy Prime Minister (ODPM) in order to govern the management of private rented sector properties. The introduction of the legislation was essentially designed to raise standards within the sector, with houses of multiple occupations (HMOs) attracting additional costs. However, there have been some reservations about the effects of the new rules on buy-to-let landlords in the UK.
Nevertheless, the ODPM has denied that the legislation will have any negative impact with Baroness Andrews claiming that the new measure are "not only aimed at protecting tenants and raising the standards among landlords, but crucially they will help a thriving private rented sector".
Now seems like the perfect environment for buy-to-let investors to look into buying property as the market is strong and house prices are forcing many into rented accommodation. Experts however, are warning Brits to shop around and make sure that they follow all the appropriate guidelines before they commit to becoming a landlord.
25 May 2006
