With increasing numbers deciding to rent, there is no shortage of areas where the case for property investment is compelling, despite squeezed margins.
Anyone tempted to invest in a buy-to-let property in 2017 is going to have to research the market with care. Yields have been squeezed by the reduction in mortgage interest relief on second homes, as well as the three per cent stamp duty surcharge on such homes.
Yet with more people than ever renting, there is no shortage of areas where the case for making a buy-to-let investment is still quite compelling.
With Theresa May’s government putting much emphasis on infrastructure, buy-to-let investors will no doubt be getting out their maps to see how projects such as HS2 and the third runway at Heathrow might make some areas more attractive in the medium to long-term. The Prime Minister’s own constituency, Maidenhead, is on the soon-to-be-completed Crossrail route across London, so it is a town to watch for that reason.
New-build apartments catering for young professionals also remain a good bet for investors. “One and two bedroom apartments in the new-build sector in key regional towns and cities, including Bristol, Manchester and Reading, will no doubt be popular investments in 2017,” predicts Ben Newman, a buy-to-let specialist at Savills. Newman is also expecting a wave of investment in fringe locations around London, such as Croydon and Bow, which can offer yields of up to 4.5 per cent.
Kate Eales, National Head of Lettings at Strutt & Parker, sees hope for buy-to-let investors in the fact that more and more Londoners are renting by choice, not out of necessity. “We could be on the brink of becoming a rental nation,” she says, after a recent Strutt & Parker survey of Londoners found that nine per cent of respondents preferred to rent rather than buy. “Buy-to-let hotspots will continue to focus on convenience as tenants continue to demand reasonable commutes and ease of access to gyms, restaurants and a social scene.”
Islington and Clerkenwell continue to be popular with buy-to-let investors, adds Eales. The same is true of Nine Elms, south of the river, where competing developments are coming to completion and offering differing packages to entice tenants. In South West London, those priced out of Clapham and Balham are considering Streatham and Tooting, two more areas to watch this year.
Away from London, some of the best buy-to-let prospects seem to be in the east of the country, if present trends continue. According to the Kent Reliance ‘2016 Buy-to-Let Britain report’, the highest performing areas in terms of net rental yields were the North East (6.7 per cent), Yorkshire and the Humber (6.3 per cent) and the East Midlands (5.8 per cent).
However, according to recent research by TotallyMoney.com, the centre of Sheffield and postcodes in Glasgow and Bradford are the best-performing buy-to-let areas of 2016, which could be a guide to future performance.
According to experts in the specialist field of student buy-to-lets, it is not university cities with sky-high property prices, such as Oxford and Cambridge, which are providing the best value for buy-to-let investors, but less affluent areas which offer a significantly higher rental yield. At the start of the 2016-17 academic year, the three top-performing areas pinpointed in research by Property Partner were Sunderland, Teesside and Aston/Birmingham.
With the current condition of the UK property market, few will make a quick killing with a buy-to-let investment. But there are all kinds of areas which are offering shrewd residential investors reasonable value.
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