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Buy-to-let investors on the rise

Assetz, the buy-to-let specialist, has seen registrations almost double annually as buy-to-let consolidates itself as the investment of choice.

This year (2012/2013) Assetz has received 65,000 live registrations, an 85% increase on last year (35,000 live registrations) and an average of 2,500 new registrations per month.

However, with the surging activity in the property market and a lack of supply, traditional buy-to-let hot-spots including London and the South East are becoming less affordable and ultimately less lucrative.   London has seen significant property price rises which now stand at an average £438,000 (July 2013), a 9.7% annual increase, according to data from the Office for National Statistics (ONS).

Other regions of the country, including the North East and the North West of the UK, are yet to see this level of growth. In the North West the average property price stands at £162,000 (down 0.7% annually) and in the North East £144,000 (down 1.3% annually).   Assetz data revealed that the typical gross rental yield it can achieve in London is 4-6% and outside of London 7-10%.   It is important that buy to let investors look to the North now while prices are low, before the rise in property prices ripples out from London and the South East. But they must pick the most economically sound areas, where employment is high and tenants are able to meet rental payments.

Suburbs clustered around thriving cities are key. For example, Cheadle constituency in Manchester[1] has 2.3% unemployment (potential hot-spots include Cheadle, Bramhall and Heald Green). Sutton Coldfield, Birmingham has an unemployment rate of only 2.6%, the lowest rate in the City. Leeds North West constituency has the lowest unemployment (3.4%); look to Headingley and Yeadon for investment.   However, awareness of the potential fruits of the North is yet to hit the average landlord’s consciousness.

A recent survey conducted by Assetz revealed that London was the most popular region for prospective investors, with 26% identifying the capital as the investment area of choice but with a clear bias towards seeking capital growth given rental incomes are so low. Next most popular was the South East (17%) and the South West (10%). The least popular was Northern Ireland (2%), followed by the North East (3%) and the East of England (4%).

Stuart Law, CEO of Assetz, commented:

“Property investment has become main stream again in the last year and, with interest rates so low, people cannot see a downside to buy-to-let. However we are now at a critical point where property prices will start to rise faster than rents; this will happen first in Greater London which has seen tremendous price increases in recent months.

“Investors who are keen to not miss out on property price growth and stunning yields currently achievable in the rest of the country ought to invest there now. If you sit on your hands you will miss out on the safety factor of high yields as prices rise. In the current climate, by investing in the North, it is difficult to lose out. Property prices are yet to experience the headline-inducing giddy heights of London and the South East, but it is important to focus investment on the in-demand city-centre and suburbs clustered around cities like Manchester, Leeds, Birmingham and Liverpool where employment is high.

“The potentially lucrative yields of the North are now starting to enter many landlords’ consciousness. The savviest investors will start to look away from London and head North to really make their money work.”

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