Property and talking about house prices are almost a national pastime in Britain, and we think of the housing market as a safe haven for investment.
Investment property is exactly that, an investment, and therefore it carries risk as well as reward, partly why mortgage rates for these types of properties are higher. But there is a silver lining for those with larger deposits who are thinking of buy-to-let in urban and rural markets.
The BTL mortgage market
If you’re in the fortunate position of having a larger deposit or larger equity position, you could stand to benefit from hugely reduced lending rates. A landlord who’s able to raise 50% deposit could get a rate of 1.19% compared to the higher loan-to-value end of the BTL market (>80%) where rates are high – 4.79% on a 2-year fixed at 85% LTV.
New areas of demand
News emerged recently that the 50 of the biggest UK employers have no plans to return all staff to the office full-time in the near future (BBC News). The draw of urban areas is primarily work, social and cultural and if you now work from home and primarily socialise locally, it does beg the question as to why you would pay thousands of pounds in rent to be in a city centre location.
However, while bigger cities may be difficult places to let at the moment, landlords in rural areas and those who own holiday lets will tell you a very different story… and may actually be benefitting from these shifts.
Coronavirus has also created new areas of demand, in particular we have seen a large increase in buyers purchasing second homes in the country, holiday lets, and in let-to-buy mortgages, where borrowers let their main residence and raise capital to purchase another property, and invariably these have been people looking to move out of cities.
Landlords may need to rethink their next purchase, taking these socio-economic changes into account, and a holiday let or investment property in the country could prove to be a better investment going forward, depending on what’s important to you as investor: capital growth or higher yields.
The future?
Mortgage rates are likely to remain low and the housing market is resilient and best viewed in the longer term.
This is a very interesting period, where vendors' and buyers' aspirations towards price are very similar and therefore deals are getting done. Vendors are being sensible about pricing and buyers are taking advantage of that. The borrowing rates will remain low, stamp duty benefits are here for the coming months and for the first time in living memory vendors' and buyers' views on price are very similar - and if the price is correct, people have the confidence to buy at the right rate.
What can landlords do?
It may be prudent for portfolio landlords to consider moving their portfolios into limited company structures given the stamp duty holiday for long-term tax savings, however you should seek advice from an independent regulated advisor.
All in all, both the financial services market and the property market are functioning well and it's a great time to purchase. If you're thinking of selling you have a rapidly moving market place.
Contact our Alderley Edge branch for further information:
01625 540340
alderley@jackson-stops.co.uk
