Buy to let properties have been growing in popularity in the UK for years. Many property investors — both domestic and international — have purchased buy to let properties for their portfolios as medium to long-term investments, and more properties of this asset class are being bought every day.
Recent years have proven to be interesting times for investors in the UK property market. Tax changes, Brexit, Stamp Duty and Covid-19 have all played a part in the market’s performance. However, the market has remained relatively stable and positive. The only thing that has separated a good investment from a bad one is the amount of due diligence that has been undertaken. This is why it is so important to seek advice from experts before making an investment.
Treo Investments have been asked, “is buy to let a good investment” on many occasions recently, and we have answered “Yes” every single time. This guide explains why investing in buy to let in the UK, continues to be an attractive proposition for investors around the world.
Current Undersupply & Demand in the UK
The buy to let market in the UK is thriving. One of the biggest influential factors is the fact many people in the UK cannot afford their own property, creating the rise of ‘Generation Rent.’
Generation Rent is predominantly made up of young professionals who want to enjoy life, but can’t afford to pay for luxury upfront. Instead, they’re opting to rent and make purchases on finance, so their money can go further. Saving for a house deposit is difficult for the younger demographics, and rather than live on a budget to scrape the money together, they would prefer to rent and live the good life now.
However, research conducted by the Royal Institute of Chartered Surveyors found the amount of rental properties being built in the UK has fallen in the last two years, despite the huge demand. This is creating a clear opportunity for property investors to supply the country with suitable accommodation.
It is believed the private rental sector (PRS) will make up 25% of the country’s housing market in the next five years, the biggest growth in the sector in the last two decades. As it stands, the private rental sector is worth £1.5 trillion and is the fastest growing property sector in the country. By 2039, it’s estimated renters will outnumber the amount of homeowners in the UK, meaning buy to let properties have a staggering amount of long-term potential.
Average Rental Figures are Increasing
People are becoming increasingly interested in renting luxury accommodation. We live in a world where people have become used to the finer things in life, and anything that does not meet these expectations is quickly dismissed. Because of this, potential renters are willing to pay a premium rate so they can live in a property that fulfills their needs. In turn, this makes the market more lucrative for investors, as they can increase rental figures in line with the demand for their properties.
On average, buy to let properties in the UK deliver a yield of 3.53%. However, there are many cities in the country that perform far better than this. In the North West of the UK, metropolitan areas are seeing much better rental figures.
Manchester’s average rental yield reaches 5.55%, and Liverpool’s currently stands at 5.82%. In certain postcodes, yields as high as 7-10% are not uncommon because there is such a high demand for buy to let properties in these cities.
Renting Buy to Let Property Has Become Easier for Potential Tenants
Covid-19 has impacted property markets all over the world, but letting agents in the UK have adapted to the issues at hand to ensure the industry remains stable. What’s more, the new methods introduced for viewing and renting properties will still be in place even when the UK’s lockdown has fully lifted, opening your buy to let investment to a wider audience. We have seen:
- Potential tenants take virtual tours of properties with the use of technology
- Agents have been able to put delayed tenancy agreements in place
- A rise in demand for rental properties, as it is faster to rent a property than to buy one
Property is a Stable Asset
When discussing if buy to let is a good investment, it helps to remember why investors choose this particular asset over others. A property that has been thoroughly researched beforehand will bring in a regular stream of income, providing you invest in a property that suits the needs of your tenants.
While buy to let properties should be seen as a long-term investment, capital growth will build in your investment as it gains a reputation for delivering on — or even exceeding — the expectations of the people who rent from you. A lot of success can come from the strength of your reputation, which is why your property investments need to deliver on all fronts.
Property is considered one of the safest investment options because the demand for stable property developments will always be prominent.
Is Buy to Let a Good Investment in the UK?
As a long-term investment, buy to let properties in the UK are a very good option for international investors. As we mentioned earlier, the only aspect that turns a good investment into a bad one is a lack of research.
At Treo Investments, we are experts in the UK property market. We conduct a full 360 due diligence process into every investment opportunity we consider before presenting any property to our investors. We know which cities are demanding more buy to let properties and the rental yields you can expect.
For more information on the latest buy to let investment deals in the UK, please get in touch with a member of the Treo team, who will be happy to assist you.