News: BTL boom defies the skeptics

Thu, 01 Nov 07

Now is an excellent time to enter the BTL market, according to Assetz...

Despite speculation of a housing and buy-to let decline, Assetz, the property investment specialist is urging the medium term investor to capitalise on the current climate and invest in buy-to-let, with current market conditions giving excellent opportunities for investors.

With rents predicted to reach record growth rates*1, bank base rates on the way down, a number of forced sellers discounting their property to hagglers and developers launching enticing incentives, now is proving an excellent time for careful investors to get into the market, with the most profitable rental income situation seen for years.

Great opportunities available

A growing number of potential first time buyers are reported to be staying in rented accommodation*2, awaiting greater market certainty. As a result, demand for rental property is strong and rental incomes are expected to grow over the coming months, as the balance between supply and demand is altered and demand for rental property outstrips supply*3. RICS has recently commented that apartments will see the strongest rental growth, clearly discrediting rumours of a UK wide oversupply.

Stuart Law, Chief Executive, Assetz comments: “While the market has been subject to much speculation and turmoil over the last few months, there is significant evidence to suggest that for those taking a medium to long term perspective, now is an excellent time to invest in buy-to-let property.

“As the number of sales slow, UK developers are offering some great opportunities. Developers need early sales on a scheme in order to achieve bank funding, with typical high-density apartments proving ideal for renting. However, my advice to investors would be to ignore simple price drop incentives and to look for what impact the discounts will have on yields and on overall return on investment. Don’t just buy flats but diversify into houses, both new and old and possibly include some high-yield student accommodation.

“With interest rates predicted to fall imminently, and rents rising, both new and established investors will soon reap the rewards of higher rental yields with positive cash-flow. Any lower prices offered by the few sellers in the market will be taken advantage of by aggressive buy-to-let investors and combined with rising rents they will see high yields, not experienced for a few years.”

Zero chance of  price crash

Assetz predicts that rents will have risen by 10% over the last year, with a further 10% rise predicted for 2008, making almost all current property investments cash positive, even if an investor is having to subsidise their mortgages at present.

Law concludes: “If you read up on the facts and bear in mind market dynamics, there are great foundations in place for UK residential property to prove a rock solid investment over the next 10 years. My advice would be to target smaller households in the right areas and to keep cash in reserve for short-term risks but don’t miss this ‘perfect storm’ of a buying opportunity.

There is a zero chance of a house price crash at present and high certainty that a 4.4m, Government predicted increase in our population by 2016 will give plenty of capital growth, on top of the rental profits now beginning to flow through.”

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