Cambridge, UK: Buy-To-Let Property Market - 2009 Review & 2010 Outlook
Nick Diggle, Director of Martin & Co Letting Agents in Cambridge discusses what happened to the market in 2009 and why, and looks ahead to the prospects for 2010.
2009 UK PROPERTY MARKET IN REVIEW
Last year ended more positively than many industry pundits had predicted. Property prices began to rise in the spring of 2009, and to the surprise of many continued to make small but positive progress throughout the year, while the number of actual property sales in the UK in December 2009 was more than double the number in January at the start of the year.
Demand for rented properties remained strong for the most part, as people continued to put-off house-buying in lieu of more stability in the marketplace. Restricted mortgage lending continued to prevent many from attaining home ownership, forcing potential first-time buyers into renting instead. A large number of potential vendors also turned to lettings as a short- to medium-term option, enjoying a steady rental income while biding their time waiting for property prices to eventually pick up again.
High Yields & Low Interest Rates
Despite the tough economic climate, many Landlords and buy-to let investors were undeterred from expanding their portfolios in 2009, seeing instead the market opportunities afforded by historically low property prices, increasing tenant demand, and attractive rental yields. The allure of more promising returns from property coupled with a loss of confidence and general sense of instability in traditional financial investment vehicles, also led more cash-ready investors - those unaffected by lending obstacles - out of the woodwork.
The Bank of England's decision to drop the base rate to 0.5% in March 2009 in an attempt to stave-off the economic recession was a welcome move. It helped ease the financial pressures on countless home owners, investors and property speculators who could have potentially fallen foul of their mortgage responsibilities and faced repossession. In fact, by the end of Q3 2009, repossessions had already begun to decline from the levels seen at the start of the year.
Positive Annual Return from Property
Annual returns for buy-to-let investors were far better in 2009 than had been expected. Reliable rental income, good yields and good timing were the keys to success, and the brave investors who jumped back into the market in the spring of 2009 will be enjoying healthy returns, showing a good balance sheet of rental income and capital appreciation. LSL Property Services' Buy-to-Let Index, published this January, showed an average 7.6% overall annual return from property in 2009, from a year where nationally, yields took a slight dip, but prices gradually climbed.
MARKET OUTLOOK - LOOKING AHEAD IN 2010
The UK property market as a whole is expected to remain broadly stagnant for the next 12 - 18 months while the economy re-emerges from recession and mortgage finance continues to be hard to access without a significant deposit. 2009 saw much of the excess supply of property start to disappear and rental stock is now coming under increasing demand.
It looks as if property prices have seen their low point, so with rental yields rising, investors who have cash to put down could benefit from some attractive opportunities over the next year. Letting to good quality paying tenants, minimizing void periods between tenancies, complying with the law in terms of landlord's responsibilities, effective marketing and using a knowledgeable and proactive specialist letting agent to help you achieve the best rent (and yield) possible - should form the basis of a good buy-to-let strategy this year, as property prices may take some time to achieve significant capital gains.
Focus on Cambridge
With so many factors to consider, few pundits will ever fully agree on the direction the market will take. There is however little doubt that Cambridge's property market will continue to outperform the majority of other regions and as a result will provide some of the greater opportunities for savvy investors in terms of the potential returns.
Tenant demand from a highly-transient professional and academic population helps to underpin the city's strong rental yields, while factors such as the city's (and region's) positive economic outlook, many large employers, proximity to London and a range of international transport routes, its small size and massive popularity - all combine to suggest healthy prospects for long-term capital gains. It's little surprise that Cambridge is often described as one of the ‘Teflon towns' and is frequently tipped as one of the more promising investment hotspots in the UK. (See also Buy to Let Investors Return to Cambridge Property Market).
Rent Rises & Potential for Reinvestment
Recent increases in property values in 2009 have led some to suggest that the supply of property in the lettings market will be somewhat stifled as the ‘reluctant' or ‘accidental landlords' see a window in which to sell. Such a dip in supply would spell good news for existing landlords, with the Royal Institute of Chartered Surveyors predicting that rents will rise in 2010 as a result. Rent rises coupled with modest and steady property price increases could also set the stage for greater levels of buy-to-let investment and portfolio expansion in the months ahead.
Interest rates are expected to remain low in 2010, with many predicting a small rise in the final months of the year. While reluctant landlords and the more short-term speculators may seek an exit strategy, experienced landlords and medium- to long-term investors will be happy to bank on strong rental yields, adopting a longer term view on capital appreciation, while property values and lending conditions take their time to return to form.
Work with the Experts
If you're looking to invest in the Cambridge buy-to-let property market this year, speak to the team at Martin & Co, a Cambridge-based lettings specialist run by local brothers and buy-to-let landlords Charlie, Julian and Nick Diggle. Contact: 01223 275 150. www.cambridge-martinco.co.uk
ABOUT MARTIN & CO CAMBRIDGE
The Cambridge branch of Martin & Co is a licensed member of the National Approved Letting Scheme (NALS), a government-backed organisation set up to maintain proper standards of professionalism, best practice and compliance in the UK lettings industry. The Cambridge office is also registered with The Property Ombudsman and uses the government-appointed Deposit Protection Service (DPS) for all tenant deposits. For best practice the Martin & Co Cambridge office has its accounts externally audited every 6 months and holds all client monies in a ring-fenced client account, with full client money protection in place at all times. Martin & Co UK Ltd holds Investor in People status, and runs a year-long internal training academy, with both internal and external consultants and trainers from ARLA and the NAEA.
Written by Nick Diggle, Director, Martin & Co Cambridge, based at 191 Mill Road, Cambridge, CB1 3AN
Business Weekly: http://www.businessweekly.co.uk/martin-co-cambridge/the-uk-buy-to-let-property-market-2009-in-review-outlook-for-2010.html
See also: Buy to Let Investors Return to Cambridge Property Market:
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