If you are looking to invest in property to help boost your income, you might be wondering whether now is the right time? Remember, a buy-to-let is a long-term investment that offers you the opportunity to grow the value of your capital and receive an income too.
If you’re a new landlord, or someone considering increasing your investment portfolio, now is a great time to buy. It is evident that there will be continued demand for rental properties of all types in the future as we see a major shortage of rental properties. Zoopla found that demand for rental homes was 50% higher than the average level of tenant demand seen over the last five years driven up by a strong labour market, record immigration and an influx of overseas students. At the same time, the supply of homes to rent has increased by just 1% since 2016.
With nowhere near enough homes to satisfy renters’ housing needs, rents on newly-let properties have rocketed by an average of 11% in just a year taking the average rent to £1,119 a month and demand from tenants have gone through the roof. Rents are expected to continue to rise this year due to the shortage of rental properties. If you’re an investor who can buy in cash, now is a fantastic time to invest in property. Prices are coming back down to normal level but rents remain high which makes rental yields extremely good. The yield is a measure of the rental income you earn from your property compared to the value of your property. If you’re trying to work out if your rental yield is good, experts say compare it to the rate of return you would get if you put your money in a savings account.
Buy to let mortgages are also still available however you might be worried about recent interest rate rises. Since December 2021, when it stood at 0.1 per cent, the Bank of England’s Monetary Policy Committee has upped the base rate on 14 consecutive occasions. However, the MPC voted by a majority of 6-3 to hold the base rate at 5.25 per cent on 2 November 2023, following on from its narrow majority decision to also hold the rate at 5.25 per cent in September. We have also learnt this week that the rate of inflation (as measured by the Consumer Price Index) tumbled from 6.7 per cent in September to 4.6 per cent in October which is encouraging and should mean the end of interest rates hikes. According to the latest forecasts from Capital Economics, The Bank of England will cut the base rate to around 3 per cent by late 2025. Meanwhile, analysts at Morgan Stanley have forecast that interest rates will be cut as soon as May 24 and fall to 4.25 per cent by the end of next year. That would be a substantial decline from the current 5.25 per cent. The boldest UK interest rate forecast is from Goldman Sachs, which said a cut could come as early as February.
Due to the large discounts available on our Below market Value properties in comparison to open market listings , current interest rates still stack up well against the property being purchased, leaving a surplus profit each month. Increasing rents and future interest rate cuts will only increase this profit further. This in turn makes it a great time to invest in one of our property with guaranteed Instant equity, future capital growth as well as a strong rental income.
For more details about our Below Market Value properties or to discuss any of the above, feel free to contact Sally or Ben on 0208 339 6787 / 0208 339 6789.