Assetz® News - Buy-to-let investment in the UK

Buy-to-let investment in the UK

25th April 2006 |

The buy-to-let sector is currently thriving in the UK with a series of factors combining to create the ideal conditions for investment.

One of the primary considerations for buy-to-let investment is of course tenant demand and in an hour-long special of Channel 4's Location, Location, Location this week, Kirstie Allsopp and Phil Spencer will be addressing this issue in particular.

In the Where Best to Invest special, the two property experts look at the ten best places to invest in the UK and a common theme is the ready availability of tenants.

Brighton and Hove is singled out, for instance, because of the huge number of students in the area. Tonight's show predicts that house prices could rise by 47.4 per cent during the next five years and with demand for rented accommodation high, buy-to-let property investment is clearly seen as advisable.

Manchester is championed for the same reason, with recent statistics indicating that the north-west city has the biggest student population in Europe.

After the devastating IRA bomb in 1996, Manchester underwent a £700 million facelift and the city has been blossoming ever since. The property show argues that young professionals now have "money to burn" in the thriving urban district, while properties on the outskirts of the city centre are tipped for staggering house price growth in the coming years.

Leeds is also seen as lucrative for the buy-to-let market, thanks again to a huge student population. Even modest properties are expected to fetch around £60 per week per bedroom, giving investors a valuable income in addition to the expected capital gains.

While the UK's large student population is extremely beneficial to the buy-to-let sector, experts also point to immigration as a significant factor.

Nicola Severn, marketing manager of Mortgage Trust, indicated that many new arrivals are looking to rent rather than buy and landlords are inevitably finding that demand is boosted as a direct result.

"Migration to the UK is increasing steadily and is likely to become an important element in the rental demand mix," she said.

"The majority of non-British tenants tend to be migrant workers rather than students and typically represent a stable, long-term customer base for landlords.

"One in three plan to stay for between one and three years, while 15 per cent intend to stay 'indefinitely' or 'permanently'," she added.

Interestingly, a number of property experts have been observing that buy-to-let investors are almost replacing first-time buyers in the UK property market.

Nick Gardner, director at Chase de Vere Mortgage Management, argued that this has been crucial in sustaining the growth in the housing sector. Existing owners looking to trade up, for instance, already have a ready market of potential buy-to-let investors, meaning they do not have to rely entirely on first-time buyers.

There is also a general consensus in the UK that people are now buying houses at a later stage in life. Richard Donnel, director of research at Hometrack, recently commented that "some see a house as tying them down" and it is this desire for flexibility that continues to boost the buy-to-let industry.

Conditions are certainly conducive to growth in the sector and experts suggest it is set to remain buoyant.