Market showing strength for buy-to-let investors
The second quarter of 2017 came with a raft of good news for buy-to-let investors. Many were predicting hard times for the sector with the changes to landlord tax relief which were introduced in April, but those fears proved to be unfounded.
The strength of the buy-to-let market is built on the pillars of a supply-demand imbalance and rising house prices which ensure more and more people are forced to rent long term, both of which are issues that are only becoming more severe over time.
The latest House Price Index from Your Move confirmed that the average house price exceeded £303,000 in June, representing a rise of 4.8% over the previous year. This value is an all-time high and shows that the housing market is on the up despite all the recent political turmoil which threatened to spread uncertainty. Unsurprisingly, the property market was immune to such tremors.
Data from Property Wire further confirms this trend, stating that prices are up everywhere in the UK, with the notable exception of London, which continues to see a slowdown as investors leave the city behind. In contrast, the Northern regions, in particular the big cities in the North West, are going from strength to strength. The momentum is in the North and looks likely to stay there for a long while yet. Rightmove has provided further evidence of this trend, noting that the number of sales agreed in Northern regions has increased by 11% over the last year.
Why are house prices rising so quickly and so steadily? Quite simply, there are not enough affordable new homes being built, and the lack of supply is forcing people to pay a premium. Even though recent statistics from the Department for Communities and Local Government confirm that Q1 2017 saw a 10 year peak in the number of new homes being started, this new peak only represents a 3% increase over the previous record. Considering that there is an annual shortfall of approximately 60,000 homes, this is nowhere near enough to solve the issue.
With all that in mind, it is no surprise that recent research from Knight Frank predicted that a quarter of households will be renting privately by 2021 thanks to a lack of affordable supply, representing a rise of almost a million households compared to today’s numbers.
As demand rises and there continues to be a shortfall of available properties, the barrier to entry will only become more unaffordable and more and more people will have to remain in the rental sector for the long term.
For buy-to-let investors this situation offers the best of both worlds. The capital appreciation on offer only becomes more impressive over time, and rental yields are also growing all over the country, apart from London, as competition for the best rental property heats up and tenants are willing to pay a premium to secure their perfect apartment.
Where is the best place to invest? Should you purchase and off-plan apartment or a completed apartment? How do you actually go about investing in buy-to-let property? Request Knight Knox's free buy-to-let guide today to find out more.