Assetz® News - Buy-to-let investors are in it for the long haul

Buy-to-let investors are in it for the long haul

28th April 2006 |

As buy-to-let investment becomes increasingly popular in the UK, experts are advising prospective investors that it is a long-term sector and not a means of making a quick fortune.

At the same time, the potential returns on a buy-to-let property investment can be exceptional and those with the patience and foresight to adopt this strategy frequently find themselves able to build up a portfolio of houses to let.

Because landlords also have to pay interest on the mortgage, it would be very rare for a buy-to-let investment to provide enough rental income to make it worthwhile.

Indeed, a huge part of any buy-to-let project is capital appreciation and for this reason prospective landlords are keen on predicting the potential hotspots for house price rises over a reasonably long period of time.

With this in mind, a quick look at today's House Price Index from Halifax is perhaps advisable, for an idea of what has been happening over the last year.

Cupar in Fife was Britain's top property hotspot last year, with house prices rising by 36 per cent from £117,552 in the first quarter of 2005 to £159,332 this year.

Interestingly, Scottish towns have actually dominated the list of the top performing towns for house price growth. Lochgelly, Coatbridge, Lanark, Kilwinning and Alexandria all joined Cupar in the elite top ten, as house prices in Scotland began to close the gap on England.

There were also significant gains in Cleckheaton in West Yorkshire, Darwen in Lancashire and Crook in County Durham, while Port Talbot in Wales also saw impressive growth.

During the first quarter alone, the biggest house price rises were in Wales at 4.5 per cent, East Anglia at 3.4 per cent and the East Midlands at three per cent.

Incredibly, with both Wales and the East Midlands seeing average house prices rise above £150,000, the north, the north-west, Scotland and Yorkshire & the Humber are the only four regions where the average house price is below this mark.

Property investment in the north-west may seem a particularly astute option with this in mind, as prices climbed by 9.4 per cent in the region during the last year, putting it at the top of the chart for this statistic.

Martin Ellis, chief economist for Halifax, observes that the annual rate of house price inflation in fact slowed in all of the regions in Britain last year, with the exception of Greater London.

Despite this, he fully expects a period of stability in 2006, with single digit growth in the most of the country. While gains capital growth may not be spectacular this year, it is worth reminding that buy-to-let investment is a long-term strategy.

"Buy-to-let is a business like any other where a professional approach and careful research can provide a sound basis for solid investment returns," said Nicola Severn, marketing manager for Mortgage Trust.

"It should always be viewed as a long term investment," she added.

Ms Severn went on to say that while experience is not a prerequisite of buy-to-let investment, it is not something that should be entered into lightly, not least because of the relatively large initial investment required.

The UK has performed well in the buy-to-let sector for a number of years and it remains a popular choice among novice and seasoned investors alike.