As we move further into 2011 and the country moves tentatively out of recession, we ask ourselves whether it’s a good time for the novice/beginner to invest in property. Despite uncertain predictions for the UK property market in 2011, with some analysts predicting a small increase in house prices and others anticipating either a minor slide or no move at all, there is positive news to be found for those thinking about putting their money into property.
Recently the Financial Times reported that Buy-to-Let mortgage deals have never been better. With a few lenders raising Loan to Value (LTV) amounts to the highest levels since the start of the recession, (Kensington Mortgages are offering up to 85% on rental yields over 6.1%); many established banks entering the Buy-to-Let mortgage arena (creating more competition for your business and therefore lowering interest rates) and Buy-to-Let mortgage rates still very competitive, finding one or more cheap houses for sale, upgrading them and becoming a landlord for the increasing numbers of people wanting rental properties, is looking a far more attractive option than it has done over the last 3 years.
If you have enough cash in the bank for a healthy mortgage deposit (15% +, ideally 20% or more), can buy property cheaply through house auctions and have found a location where rental properties are in demand then I think it’s really a no brainer. Savills, one the UK’s largest auction houses see its’ category C properties having the potential for the most stable return over the next 5 years. They say,
“For investors looking to build portfolios with strong income streams that will be attractive to future investors, the strategy of buying good Grade C letting properties with low capital values looks sound.”
In essence what Savills is saying is that rental prices are increasing, mainly due to the fact that less first time buyers are able to get on the property ladder; the demand for rental properties is higher than ever and properties in less than prime locations and/or condition, which tend to command lower rents, are attractive to those renters taking a hit caused by higher inflation. Savills anticipate a return of 30% over the next 5 years if their predictions are correct.
So whether you would describe the current housing market as stable or stagnant, property is still a viable investment opportunity for those looking for long term returns and 2011 may just be a good time to take the leap.