Often, the tone set by buy to let landlords and investors is to stay familiar in terms of location. Local markets can often come with increased knowledge and heightened investor confidence, however there’s a new trend emerging proving that investing in property further afield could be a better choice.
The location of a potential property always requires extensive consideration and research, rental returns and capital appreciation are factors that underpin how successful your investment may become in the future. Historically, many landlords and investors would choose property close to where they live, in a market that is familiar with the supplementary benefit of being able to keep a watchful eye on the property, particularly in the case of self-managing.
However, the property market remains buoyant as it has experienced multiple shake ups and changes in trends, leading to the need to rebalance the economy. Resilience throughout the property market has led to a notable shift away from investment in London and regions neighbouring the capital, to hotspots further north which have helped shape many cities throughout the UK as a melting pot for investment.
Now, both house price growth and rental yields are struggling to provide substantial investment opportunities in the south, therefore a growing number of investors who once trusted the southern bubble are looking to reinvest elsewhere or expanding their portfolios to take advantage of the emerging markets in regions that are more lucrative, such as the north west.
RW Invest, property specialists based in Liverpool, are giving investors exclusive access to a diverse range of properties securing the best rental yields across the UK.
Due to the transforming economic climate evident in the UK, numerous tax changes are influencing the trends in the property sector. Property investors must now factor in issues such as the 3% stamp duty surcharge which has had a detrimental effect on investing in high cost areas in London as it requires a larger lump sum of cash.
Affordability is one of the biggest deciding factors in property investment, so needs to be carefully considered, especially since the Prudential Regulation Authority changed regulations last year to strengthen the underwriting of buy-to-let mortgages, which has ultimately restricted product choice and some have found their borrowing power decreased.
Similarly, another issue is the phasing in of Section 24 rules outlining that property investors can claim less mortgage relief on their tax bills, leading to diminishing profits for some. Property remains one of the most popular choices in investment, as it is one of the only assets that provides two different types of returns, however it is important to make the right decision to maximise these.
Kent Reliance recently reported,
“Where London once led the way, it now lags behind. With an affordability ceiling reached, rents are rising fastest outside the capital, while total returns too are more attractive in areas such as the north west.”
After analysing the latest trends, as well as predicting the market in the future, investing in further afield is the sensible bet. Although initially it may seem a daunting prospect, the best performing markets are sitting further afield from the capital.
Besides from considering capital appreciation when looking to invest long term, investors need to observe current rental yields to determine the strength of the area in terms of its prosperity. Furthermore, one small downside to investing in an area away from where you live is that it is harder to self-manage.
Processes involved in self-management are finding potential tenants, drawing up contracts and dealing with maintenance and repair requests, which prove more difficult particularly depending on the nature of your job and lifestyle. One alternative would be to use an external letting agent or management team to manage these tasks for you, however this comes as an additional cost.
Whilst this may first seem like a pricey extra, if you consider the strengthened rental yields and increased opportunity for capital appreciation, you can begin to understand that ultimately it will work out more financially beneficial, particularly as it gives you more chance to diversify your portfolio in terms of location.