Yield is king for buy-to-let investors
22 April 2015 3146 Views
With pension reform, council licensing changes and a General Election on the horizon, many are anticipating a boom in the buy-to-let market.
The £1 trillion sector has already grown from £15.7bn in lending to £27.4bn last year, and shows no signs of stopping, especially with the launch of the brand new dedicated investment property portal, Buy2Let.com next month.
Regardless of the impact of the next few months, the private rental market continues to pick up the slack left by the financial crisis, which has created a dearth in the supply of affordable housing and suitable mortgage products. Such is the strength of the rental sector that new reports predict annual buy-to-let lending will surpass £30bn by 2020. Founder of Buy2Let.com, Martin Wilkinson, estimates that the sector is growing at a rate of £50bn per year, delivering some much-needed stock into the private rental sector, which is larger than the social housing sector by some margin.
Launching a brand new property portal, dedicated to the residential buy-to-let investment market, Buy2Let.com, Martin believes that the sector is entering a perfect climate that could see the UK mellow its obsession with homeownership.
“We are a nation of property fanatics, and owning a property has become a bit of an obsession. For younger generations, it is almost expected that they should get on the housing ladder as soon as possible, even if that means borrowing from the family. The reality is few countries feature home ownership as the dominant housing model, as is the case in the UK.
“There has been much talk of ‘generation rent’ over the last few years, and the unfair disadvantage that our property boom-and-bust cycle has handed them, coupled with a much leaner mortgage market with stricter lending criteria. For them, the private rented sector (PRS) has been a saviour, and the sheer variety of properties and fierce competition has allowed the sector – which is 95% buy-to-let investors - to flourish. We must remember that people do actually choose to rent; the size of the rental market is not indicative of the number of people who can’t afford or find a house to own. The bad landlords need to be rooted out, but the buy-to-let market is very much open for business, and is, on the whole, providing a very good alternative and lifestyle choice to home ownership.”
Buy2Let.com puts the property investment market on a par with other forms of investment, such as annuities, shares and bonds, allowing investors to compare buy-to-let annual yields favourably. This emphasis towards annual yield, or return on investment, has, perhaps surprisingly, never been done before and is an attractive feature for those looking to start or expand their property portfolio.
Martin explains: "We know that investors are driven by two things – appetite for risk, and annual yield, or return. We have made both of these key features of our portal, to make it easier for buy-to-let investors to see exactly what they are getting. Working with estate agents, developers, and corporate landlords, we source and list only genuine buy-to-let investment properties, providing estate agents with a direct marketing outlet, and investors with a dedicated source of opportunities and analysis of the market.
“In the property investment sector, there is a lot of talk about capital growth, but for those investing in a property to let, we believe that rental yield is really the only calculation you should be looking at. Capital growth should be seen as a bonus, and in any case, can only be accessed by selling or refinancing.”
Allowing both national and international investors to comprehensively search for buy-to-let opportunities across the country by annual yield and compare returns on tenanted, vacant and HMO properties, Buy2Let.com is a very valuable tool for investors, and gives a UK-wide perspective on the market.
Martin continues: “The resources for investors to find their next property are somewhat limited, and it can be a very time-consuming task to compare different properties in different parts or the country and from different agents. We developed Buy2Let.com to revolutionise both the way investors find and compare opportunities, and the way estate agents, developers and corporate landlords market their buy-to-let properties.
“With more favourable rates and relaxed lending criteria from mortgage providers, and strong demand for rental properties, buy-to-let is riding the crest of wave right now. There has been dramatic growth in the last few years, and we predict that in 2015 the growth will accelerate further still.
“Whatever the outcome of the General Election, or what over 55’s choose to do with their pension funds, there is no reason the buy-to-let market can’t continue to generate good returns for investors. Our entrance into the market will cement this, allowing property investors to access the information they need to make smart investment decisions.”