Here are the 5 top reasons to invest in buy-to-let:
1. High Yields
Buy-to-let properties provide some of the best yields for investors. Over the past 18 years, the buy-to-let sector has provided better average returns than any other major asset class.
Depending on which part of the country and the type of investment you choose you can expect returns as high as 8%. Where you invest is crucial- by researching property reports, looking for hotspots and using yield calculators you can find the best returns. For example, although London commands the highest rents in the country, the high cost of buying a property there often leaves the yields relatively low. Currently, the areas consistently topping these lists are regional locations and cities.
2. Capital Appreciation
Another benefit of buy-to-let investments is they often gain value over time. Usually, once you have invested into a property, it is yours to sell on the open market.
Therefore, regional cities once again shine as some of the best investment options. Current forecasts see London’s house prices (at best) stagnating or (at worst) being a bubble about to burst. On the other hand, many professional reports have highlighted regional cities as poised for growth in the coming years.
Apartments in particular have seen impressive capital appreciation over the last decade. During this period the average UK apartment has seen its value rise by 60%, whereas the average house has only seen 34% growth.
3. Strong Tenant Demand
The number of renters has been consistently growing over the last decades. With house prices becoming more expensive and often unaffordable, people are turning to the PRS (Private Rental Sector) for impressive accommodation in enviable areas. According to the English Housing Survey, there are 1.4 million more renters today than there were in 2008.
This figure doesn’t look set to slow down either. Currently, 89% of buy-to-let landlords are optimistic that tenant demand is either going to remain stable or grow over the next 12 months. Some attribute this to theshifting attitudes towards renting, as people are becoming disillusioned with the high cost of buying and owning their own homes and see the PRS as a viable alternative.
4. Low Risk
Buy-to-let investments are generally considered to be relatively low risk thanks to the fact that rents and house prices traditionally rise. To complement this, there is a lot of information available on the housing market, allowing investors to easily stay informed. Plus, many people like the tangibility of bricks and mortar- being able to physically see their investment, rather than take the chance of investing in stocks and shares.
A recent poll by Property Partner has revealed that 83% of people are more likely to weight their investment portfolios towards UK residential property. It is also considered to be the very safest asset class by 36% of respondents, the second being cash only chosen by 27%.
5. Rents are Rising
National rents have seen steady growth over the past year, reaching a peak of 8.1% growth in July 2015. Rents generally have been on an upwards trajectory for the last decade thanks to the strong demand.
The latest October forecast has seen the average UK rent (excluding London) increase by 3.5% in comparison to the same period last year, or 9.7% higher than October 2012. It increased in 9 out of 12 regions, with the average UK rental value excluding London now reaching £749pcm.
This positive growth is defying the autumn slow-down usually seen at this time of the year, confirming the increasing importance and strength of the rental market as a whole and proving why now is such a strong time to invest into buy-to-let.