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Buy to Let Investment Guide
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Why Choose Buy to Let?
Buy-to-let property investment is one of the most attractive options for those looking for a way to gain long-term financial security.
When faced with the decision between unstable investment classes and a fluctuating stock market, the UK’s buy-to-let property market often comes out on top.
When done right, buy-to-let investment can generate a consistent income that allows investors more financial freedom, even into retirement.
If you’re interested in investing in buy-to-let and you want to find out more about how to invest in property for lucrative returns, take a look at this informative buy-to-let guide on why you should choose UK property investment.
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Buy to Let Property Investment
The UK Housing Market
Although there has been a slight dip in the market this year, the value of UK property has been rising steadily in the period following the Covid pandemic.
Certain areas in the UK, such as Liverpool, are leading the way with this property growth, achieving a 23.37% increase by the start of 2021 and set to rise by a further 14.5% by 2026.
A lot of homeowners in the UK have benefited massively from rising house prices and capital appreciation over the years.
Ever since the introduction of the 1988 Housing Act’s Assured Shorthold Tenancies, the property market was opened up to buy-to-let investors, creating the potential for an accumulation of wealth outside of people’s day-to-day careers.
In many cases, this decision to invest to let was very profitable, especially when you look at house price growth.
Research by the Telegraph revealed that investing in a run-down UK terraced house with two or three bedrooms in 2012 generated a market value of 180,000 by 2014 for one clever investor.
There are examples of similarly successful investments across the UK, with the cities of the North West currently possessing the strongest growth prospects as we move towards the middle of the decade.
House prices and rental costs are on the rise throughout the UK, with the North West region standing out above the rest.
Cities like Liverpool and Manchester have attracted attention from savvy investors from around the globe due to the impressive rental yields and affordable property prices on offer – ranking amongst the best areas to invest in property.
The demand for rental properties is a factor that’s contributing to the success of the buy-to-let market.
In Q2 2021, demand for rental property reached new heights as the number of properties available for rent fell.
With the majority of millennials being much more likely to rent than buy, the demand for rental properties from young professionals is sure to remain strong for many years to come.
The North/South Divide
If there’s one thing that constantly comes up when discussing the UK property market, it’s the divide between the North and the South.
While London has long been the first point of call for many people looking to invest in property in the UK, the state of capital’s property market over the past several years has led many to start questioning whether it’s worth choosing London for their next buy to let venture.
Highly-priced properties, declining rental prices, and resultingly low rental yields are a few of the reasons many are steering clear of investing in London property.
Unless an investor investigates the areas in London that are expected to see some growth further down the line, they’re unlikely to make the kind of returns they’d hope.
The North, in comparison, gives investors a much better chance of making a lucrative investment.
Property hotspots like Manchester boast average rental yields of up to 8% and offer much more affordable property prices than the capital.
The divide between these two areas is made obvious when you consider the average cost to buy a property in London compared to the North.
According to Savills, for a two-bedroom flat in London you can expect to pay just over £500,000, whereas, in Manchester, the same price can get you a six-bedroom house with enclosed gardens and a large driveway and garage.
The affordability of Liverpool property, paired with increasing rental costs of 10% by 2026, has generated some highly impressive rental yields in the city and attracted a lot of interest from those who want to invest in buy-to-let.
Liverpool boasts an average rental yield of 7.7%, with yields in certain postcodes going as high as 10%.
In 2017 and 2018, record numbers of Londoners were reportedly leaving the capital and moving up North.
A total of 10,200 people moved to Manchester from London in 2017, with around 30,000 of the total of London leavers in mid-2016 to 2017 being in the age range of 25 to 34.
With more people leaving the capital, many of whom are likely young professionals, demand for high-quality city centre property is dwindling in London and growing in the North.
Liverpool and Manchester are currently experiencing record levels of demand for rental property, and with the popularity of the North as a place to live, work and invest, this demand is likely to continue for many years to come.
You can learn more about London property by reading the London property market forecast.
Property Investment Checklist
Interested in investing in one of our buy-to-let properties for sale in Liverpool and Manchester? Read the information on our property investment checklist first to make sure your buy-to-let investment runs smoothly.
1. Understand the Buy-to-Let Process
Property investment is a big commitment, so before going forward with your investment, make sure you’re fully clued up on the process.
2. Research the Best Locations
Have you looked into the best areas for property investment? Research the locations that offer properties within your budget and the best return on investment.
3. Think About Your Target Tenant
The type of tenant you want your property to appeal to can dictate the location and property type of your investment, so spend some time deciding who your target tenant is.
4. Consider the Responsibilities of Being a Landlord
Being a landlord brings a lot of responsibility. Research the ins and outs of being a landlord to ensure this side of the buy-to-let process runs smoothly.
5. Get Clued up on Financial Issues
Last but certainly not least, ensure you’re aware of the financial elements involved with the investment to avoid any nasty surprises further down the line.
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The UK Property Market in 2018, 2019 and 2020
2018
The UK property market has faced a lot of uncertainty throughout the last year.
The impending outcome of Brexit led many to question the stability of the UK property market in the face of potential economic turmoil.
Discerning investors questioned whether it was still worth going forward with UK property investments during this period of instability led by Brexit negotiations.
In actuality, the UK property market in 2018 was off to a good start, with enquiries from Chinese investors into buy-to-let property for sale in Liverpool having increased by 160% since January.
By the third quarter of 2018, the UK economy had grown at its fastest pace in two years.
Despite Brexit fears, overseas investment into the UK property market was strong as ever throughout 2018, with a third of all homes purchased for £1 million or more by foreign investors.
Properties in a number of UK cities, such as Manchester, Liverpool and Leeds, have massively outperformed the rest of the country in 2018.
Everything from rental price growth, rising house prices and capital appreciation have seen promising figures in 2018, led by factors such as strong tenant demand and a rise in city centre living.
A number of UK regeneration projects were announced and completed during 2018, which have helped boost the appeal of UK buy-to-let investment.
In May 2018, images were released of the £5 billion Liverpool Waters masterplan, whilst work began in October on the city’s new £35 million Royal College Of Physicians.
Over in Manchester, regeneration plans for the development of skyscrapers connecting Hulme to the city centre were given the go-ahead by council chiefs at the start of 2018.
In 2018, ARLA Property Mark reported that the percentage of tenants having experienced an increase in rent reached its highest level at 40% in August, up from 31% in the previous month.
There was a 2.65% increase in rental price growth in Liverpool alone, whereas Manchester saw a huge 5.76% growth.
2019
The UK buy-to-let market has some promising predictions in store for 2019.
The North will continue to be the best place to look for property investments in 2019 and beyond, with house prices predicted to rise further despite looming Brexit uncertainty.
One key trend the 2019 property market is expected to see is the rise in the number of people renting.
With a large number of people renting in the UK, many of whom are young people, this number is predicted to grow further in 2019.
According to the Royal Institution of Chartered Surveyors, rents in the UK will have risen by 15% by 2023.
Although a large number of homes are planned for development in 2019, demand for rental properties is still predicted to outstrip supply.
2020
Much like the two previous years, the buy-to-let market performed well in 2020.
House prices grew at a record pace in 2020 despite the Covid-19 pandemic, with prices surpassing the £250,000 mark for the first time.
The growth rate was so high, in fact, that it was the highest recorded increase since 2004.
Amongst this house price growth, the North West region flourished the most.
Liverpool house prices at the end of 2020, and the start of 2021, were 23.37% higher than a year prior.
Manchester showed equally strong growth levels, with prices 12.12% higher over the same period than the year before.
These growth levels have had a strong impact on the rental market.
Predictions of 17% rental price growth are expected for the UK by 2025, with an additional 21.1% increase in house prices.
Areas like the North West and Yorkshire, and the Humber are expected to see the highest growth levels, with a 28.8% and 28.2% increase in property values, respectively.
This massive future growth highlights the strength of buy-to-let as a key investment venture in 2022 and beyond.
Buying property is consistently difficult for a lot of people, especially with rising house prices in the UK.
A lot of people’s only option is to rent, and with city centre living becoming more popular than ever, there’s likely to be a high demand for quality city-centre rental properties.
The trend of young people leaving London to move up North is also expected to continue into 2019, boosting the demand for property from young professional tenants.
With a number of regeneration projects continuing to be developed and finalised throughout the year, cities like Liverpool and Manchester will become even more appealing to those seeking an exciting and forward-thinking city to live and work in.
A number of laws are due to come into effect in 2019, including the finance bill, which will mean that overseas investors must pay for disposals on UK property and property-rich entities, taking effect from April onwards.
Other laws, such as the ban on tenant fees, a cap on tenant deposits, and the introduction of three-year tenancies, are likely to go ahead in 2019, unless political events take place.
A lot of focus for the UK property market in 2021 was with the fallout of the UK’s exit from the European Union, along with recovering from the impact of covid-19.
There remains a lot of uncertainty regarding the property market after Brexit.
However, judging by the recent strength of the buy-to-let market in all aspects, such as property price growth, demand, rising rental costs, and subsequently, high yields, we can only remain optimistic that the market will continue to flourish in 2022.