With a booming lettings market in the UK, the residential sector is once again attracting investors' cash. This is particularly prominent with foreign investors who see the UK's AAA credit rating as being especially attractive and the UK Government's policies seen as more robust and safer in the long term than many other developed economies.
James Wyatt, Partner of Surrey based letting agents, Barton Wyatt, comments:
"As we see the lettings market continuing to expand in the Home Counties the demand for more family sized properties is rapidly increasing.
"The UK is a safe place to invest and with the continuing uncertainty in global stock markets, bricks and mortar are seen as a simple and reassuring investment."
However, as with all investments, detailed knowledge of the market you are investing in is essential.
The lettings market in the so called 'golden commuter belt' to the West of London in areas such as Virginia Water, Wentworth, Sunningdale, Weybridge, Esher and Cobham are unusual in that they offer expensive and good quality housing in attractive areas which are serviced by several international schools including The American Community School in Egham and Cobham, TASIS in Thorpe and ISL in Woking.
This environment has led to demand for lettings properties being skewed very much in favour of four and five bedroom family houses. Typically in London and most cities around the country, it is one or two bedroom flats that are the main stay of the lettings market but in these 'international' areas, it is definitely family homes which are in very short supply.
Lettings in the North Surrey area are at record levels, enjoying a boom after a quiet period when many foreign expats were called back to their countries of origin. They are now back with vengeance however, competing with UK tenants who might be waiting for the right homes to buy.
Wyatt suggests that the best price range to invest in is between £600,000 and £2,000,000 per property where returns of about 5-6% gross are achievable.
This income return together with extremely good prospects for capital growth, make Buy-to-Let homes a very attractive proposition. And for overseas investors, these properties can be sold free of any capital gains tax making them even more desirable.
Here are some facts that Houses are the best Buy-to-Let bet:
- houses offer better returns.
- flats have a double management charge - one for your letting agent and another for the block management.
- flats have longer voids and shorter lets.
- flats have more neighbour issues, particularly over noise.
- flats are leasehold, houses are generally freehold - a preferred form of investment.
- flats often have onerous covenants reducing the number of possible Tenants. For instance, pets are often not allowed.
Wyatt concludes:
"And to make a house even more attractive - they are all let unfurnished with very few exceptions (in our portfolio, just 1-2% of family sized houses are furnished). As opposed to flats where 50% are furnished, often giving rise to landlord confusion about whether to furnish or not.
"You can always guarantee to be wrong whichever way you turn! Needless to say that the inventory cost on an empty house will be cheaper than a property packed full of daily living necessities."
