Some may very well ask, should you even buy to let right now? There have been so many changes in the buy to let proposition over the last decade that make ‘should you’ rather than ‘how to’ very much the question in some ways.
But the fact is buy to let still has all the fundamentals of an effective way to create both an income and a future capital gain …. in the right circumstances. And indeed in some ways has added attractions. It’s just that those fundamentals need to be reconsidered in a different light.
Here we will look at what you should bear in mind when considering your buy to let options in a post-Covid property market.
Current pricing and the importance of value. The current high levels of pricing in some areas poses something of a dilemma for investors. On the one hand, it underlines property’s potential as an excellent investment in the hope of a capital gain. Yet on the other it represents a real risk of overpaying in a potentially very frothy market.
It is always important for investors to seek out value – but now more than ever.
This report looks at Below Market Value Property: What It Is And How To Buy It
Relearn what you know about yields. Historical low interest rates have also changed what constitutes an acceptable yield – compared to typical 0.5% savings interest 3% looks quite enticing.
However, fast changing pricing alongside changing rental demand has ripped up the rule book on yields. While some areas have seen yields decline other areas – such as parts of London where values have softened – have seen them climb to levels not seen in recent memory.
Would-be investors can search for the best yields countrywide using a tool like Yield Explorer, part of PaTMa’s Property Prospector.
Consider demand …. as ever. Successful buy to let is always about demand, whatever the current market conditions. Covid, alongside resultant factors such as unemployment and business closure which are as yet still unknown, has and will change both levels and patterns of demand in many areas. Yet, whatever the future holds, buy to let will invariably always be viable in areas with strong demand and low supply.
Here’s what you really need to know about demand in buy to let: Making Money In Buy To Let. It’s Really All About …. Demand
Also bear in mind supply:
Supply, and the current supply pipeline. The UK property market has historically been undersupplied, which is part of the reason it has proved a sound investment in recent years. However, through Covid builders have continued to build and developers have continued to develop. While Covid may impact their plans in future there is still substantial new build supply in the market which was largely commenced before Covid hit.
This supply will impact the supply-demand balance for several years to come …. in a market where demand is even harder to predict.
Property types …. what ‘works’ and what no longer works. Covid has focussed tenants’ and buyers’ minds on what is really important in a place to live – and space is very much towards the tops of the list. In fact, space is very much likely to be a genie out of the bottle so far as future property trends are concerned.
In future, tenants are more likely to prioritise space for spending time at home and space for working from home. And that extends to outside space too.
While in the past smaller property types have tended to be more lettable and better yielding large could become more sought after in future – even with higher rents – while small could even be difficult to let in some cases.
Location, location, location. Location has always been important for property investing, but now it has taken on an extra dimension. Rumour has it – yet it is still to some extent a rumour – that workers won’t return to city centre offices (to say nothing of shops) in anything like the pre-Covid numbers.
This means city centre property needs to be a much more considered investment. Suburban property should hold up. Rural property, something traditionally neglected by buy to let investors, could become more sought after.
Regardless of whether city, suburbs or country however micro fundamentals like local amenities, shops and schools and local transport – if not quite so much city commuter links – will continue to be paramount when choosing the location of a buy to let.