Property: Is now a good time to invest in a buy-to-let?
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Members of the Norwich & District Association of Estate Agents have identified North Norfolk, Great Yarmouth and Thetford as rental hotspots in the county, amid news that private sector rented property holdings in the UK have grown by 5.8% to £1.4 trillion.
But is now a good time to invest? Read on to find out more...
Is now a good time to invest in Buy-to-Let?
“Property remains one of the best asset classes to invest in, and now would be as good a time as any to get started or add to an existing portfolio,” says Nick Taylor of Hadley Taylor.
Alex Parish of Whittley Parish is more cautious in his recommendation. “This is the million dollar question in property, when is the best time to purchase?
In April last year we agents were taunted with reports and predictions that property prices will drop by as much as 20%. Fast forward 16 months and we have seen the opposite.
“Gauging whether now is the time to invest in a buy-to-let really depends on what an end-user is looking to achieve and their timeframes associated to this. If a long-term view is in mind with the focus on investing money in bricks and mortar rather than volatile stocks and shares, then now is a perfect time to invest.
“The rental market has seen a massive reduction in available properties to let and still continues to show no signs of easing, this imbalance of supply and demand has (and is) causing a big increase on rental prices. Typically within the area we operate we can see over 5% yields on investment properties, more attractive than monies stagnant within banks.”
“The lettings market has been and continues to be a flurry of activity, especially since the start of the pandemic,” says Stuart Monument of Pymm & Co. “With people spending more time working from home, we have found tenants are looking for a more versatile space to not only live in but to work from.
“As an agency we carried on renting properties right from the start of the pandemic, with tenants quickly adjusting and renting homes from a video tour.
"It shows how resilient the rental sector has been throughout Covid with no increase in the time that properties have spent vacant. With the well-documented increase in property sold prices and the busy sales market it has led to there being a shortage of rental stock available.
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"Sale prices have increased which has led to an increase in rents too, with a rental increase of around 10% this year alone.”
Has Covid impacted the rental market?
“The market has been hugely impacted by Covid, in a number of ways,” says Alex Parish. “However this is just one of many factors of recent times, which are creating a shortfall of available properties. Given the imbalance of demand outstripping supply, the huge increase on property prices over the last ten years means rental price have continued to increase.”
Where are the rental hotspots in Norfolk?
“North Norfolk and the coast tend to see investors buying holiday lets, as the yields are generally good, and capital appreciation has been and continues to be more than steady,” advises Ben Marchbank of Bedfords.
Alex Parish cites two larger towns as places top consider: “The rental hotspots have to be Thetford and Great Yarmouth, the demand for rental properties is extremely high in these areas due to their population compared to other market towns.
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"Purchase prices are generally lower, again in comparison to other Norfolk market towns, meaning there is the potential for high returns on your investment.”
The assumption is that more people rent in the city – is this still true?
“Rental demand is still strong both in the city and more rural areas without seeing favour to any location,” says Stuart Monument. “Some tenants have chosen to have more outside space with others looking for shorter commutes into the city to enjoy the social side of life after an unprecedented time in isolation.”
Any tips for first-time landlords, or those looking to expand their portfolio?
Whether you are a first time landlord to be, or you have multi rental properties, you need the right advice, says Alex Parish.
“Two of the most important factors are finance and tax, you need to understand what your obligations and different options are in terms of reducing tax liabilities and maximising your return on investment.
“Are you wise to invest all of your money into one dwelling or can your money work better for you financed over several properties? Are you better holding the properties in a company name or individual name? Correct and continued honest advice is extremely important.”
Nick Taylor advises investors to buy a property which has the right yield regardless of whether they would want to live in the property themselves.
“Your personal preferences about a property are immaterial as long as the property will let well and generate income. Always remember that generating income from property is hard work and not without risk.”
“When investing in property it is easy to forget about the capital value increases of the property,” says Stuart Monument. “Investors are often to fixated on the annual yields a property produces without thinking about the growth in property values.
“Lettings isn’t always about the monthly income, it’s a great way to increase your long-term asset and overall wealth. Wealth and cash are often confused. If you have a property valued at £200,000 and it increases by 5% per annum this is adding £10,000 to the annual yield and adding to your wealth.”
Those considering holiday lets need to understand the particular issues involved in this market, says Ben Marchbank. “It certainly isn’t money for old rope; unlike a traditional buy-to-let, the landlord remains liable for utilities and council tax and there are cleaning and laundry costs in addition to agents’ fees.
“This, coupled with the fact that holiday houses receive far higher levels of wear and tear from carefree (or should that be careless) guests, and that those guests are far more prone to complain at the drop of a hat, means that it is not necessarily for the faint-hearted!”
In summary, Jan Hÿtch, chair of NDAEA, takes the view that whilst the rental market, like all other markets, is affected by supply and demand, in its most fundamental form, the private rental sector is helping towards providing a rising population with somewhere to live.
“Property values, interest rates, investment returns, vagaries of government changes and legislation have and will always play into the rental investment arena, and values and returns – like all investments – will rise and fall.
“But there is and has always been a place for the private landlord, since time immemorial. Over the longer term, due to the relentless surge in population, surely this demand will only increase.”
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