After speaking to property professionals over the past few months, there seems to be an overwhelming sense that people are getting bored of the recession, with putting their lives on hold, and not knowing where is best to put their money. People are now ready to invest again. Lower house prices, rising rents and improving mortgage deals are tempting investors once more into the property field.
If you are planning on investing, or just want to know more, here are the top 3 things we think are important to consider for a successful buy-to-let investment.
1. Research the market
If you are new to buy-to-let, what do you know about the market? Do you know the risks, as well as the benefits?
2. Choose a promising area
Promising does not mean most expensive or cheapest. Promising means a place where people would like to live and this can be for a variety of reasons.
3. Think about your target tenant
Instead of imagining whether you would like to live in your investment property, put yourself in the shoes of your target tenant.
Who are they and what do they want? If they are young professionals it should be modern and stylish but not overbearing. If it is a family they will have plenty of their own belongings and need a blank canvas.
Below, we look into these 3 points in a bit more detail...
This is money note that Residential market rental yields have continued to hold up well in the last 12 months. We have seen prices maintain an upward momentum, driven by high demand in all areas of the UK, particularly London. Landlords are benefitting from low interest rates, plus a further decline in property prices, in order to fund the purchase of new properties. This activity is likely to continue for the rest of 2013.
It is difficult to see price increases abating in London, due to the consistent demand from UK and overseas, aligned to limited housing stock and the cost of purchasing. Rental yield compression and capital growth is spreading to out-lying boroughs as a ripple effect from traditional hot beds.
Today, we are focussing on the SW2 postcode; Brixton and Streatham Hill.
According to The Telegraph, the borough of Lambeth is in the list of the top 10 places to invest in London. A long, slender borough which stretches from the South Bank to Streatham and Norwood, Lambeth mixes leafy suburbs with inner-city areas such as Brixton. Prices there are forecast to riseby 21.4%. Neighbouring Wandsworth borough also features in the top 10, with its famously low council tax, house prices are expected to leap by 21.9% in the next five years. (With the highest price change predicted being Kensington and Chelsea, with a predicted property price rise of 25.6%)
Zoopla statistics show that the properties in the SW2 postcode have been on the rise for the past 4 years with a 24.21% value change from 4 years ago;
£29,538 (9.07%) from 1 year ago
£33,048 (10.26%) from 2 years ago
£36,674 (11.51%) from 3 years ago
£69,252 (24.21%) from 4 years ago
London Property Watch also provide details on the rental yield for 2 bed flats in the SW2 and surrounding areas;
Although Clapham and Balham are famously the attractive areas for renters, it is interesting to note that Streatham and Brixton achieve the higher rental yields, most likely due to property prices not yet competing with the likes of SW4 and SW12, but the popularity among renters in the area being high.
So why is SW2 becoming so popular?
It is referred to by many as The Clapham Overflow and it is a trend we have seen many times before, with Balham, and Stockwell previously benefitting, and now becoming extremely popular in their own right. SW2 is sandwiched between Clapham to the west, and East Dulwich to the east, and so it benefits from an overflow of those not quite able to make it into Clapham or Dulwich's affluent Herne Hill area, but wanting to live nearby nonetheless.
Its northerly neighbours are pulling their socks up too, with Peckham and Camberwell receiving fantastic press recently and cited as the newest bastions of gentrification.
But for now Brixton / Streatham Hill is still cheaper than Clapham. Although the price divide between Brixton / Streatham Hill and Clapham is getting smaller, it is still 5 - 10% cheaper in SW2.
For good reason, people who live in Streatham tend to be extremely proud of their neighbourhood; with many campaigning tirelessly to improve what was once known as the West End of south London.
Streatham also continues to be blessed with plenty of green space: Tooting Bec Common with its lido is on the western edge; Streatham Common lies to the southern tip and has views across south London. It attracts families looking for more space, more garden and cheaper house prices than in nearby Clapham, Balham or Wandsworth. First-time buyers and investors are big fans of the many well maintained 1930s mansion flats and new developments in the area.
With a high proportion of first-time buyers, buy-to-let investors and renters, Streatham is a transitory area but first impressions belie a strong sense of community among those who have lived there a while.
With its trendy delis, food markets and impressive Victorian conversions, Brixton is no longer the poster boy of the anti-establishment but has now been absorbed into the middle class mainstream. And there is more than fancy restaurants and dub poetry to prove it - with a 15 - 20% rise in property prices over the last year. And for Brixton, the future looks positive - house prices in the area are higher now than they were in 2007 and are forecasted to keep climbing.
Streatham Hill area falls into the more expensive SW2, the Brixton postcode, and benefits from being between Brixton and Streatham, with Streatham Hill being the nearest Railway station (Victoria in 20mins, London Bridge in 30mins), and Brixton running the Victoria Line (Victoria in 7mins) .
Families are slightly slower to come round to Brixton though; the market is instead mostly young professionals and first time buyers, which is why the smaller 1 / 2 bed flats provide the best investment. At the rate its going, the only way is up for SW2 and its property prices.
Invest now before it's too late.