Is Buy to Let Property Still a Good Investment in 2021?

Regency Invest are passionate about UK property investment with the UK buy-to-let market worth over £1 trillion, we believe that 2021 provides excellent opportunity for buy-to-let property investors to get started, or, add to their property portfolio.

And here’s why:

Forecast House Price Growth

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UK property prices are forecast to increase up to 27.3% in some regions, with some regions significantly outperforming others.

• London = 12.7%
• South East = 17.3%
• East of England = 17.3%
• South West = 17.3%
• East Midlands = 22.6%
• West Midlands = 21.7%
• North East = 21.7%
• North West = 27.3%
• Yorkshire & The Humber =     24.1%
• Wales = 22.3%
• Scotland = 25.4%
• UK = 20.4%

Source: mainstream capital values forecast 5 years to 2024 – Savills

Note that these figures do not take into account individual city’s success in these regions, which are highly anticipated to outperform against the national average.

High Levels of Rental Growth

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Average rental prices in the UK are forecast to appreciate by 12% from 2020-2024 (JLL) fuelled by the undersupply of quality rental accommodation.

The Northern Powerhouse cities are forecast to be the over achievers in the UK market:

• Manchester = 16.5%
• Liverpool = 14.8%
• Leeds = 14.2%

UK Undersupply Drives Demand for Rental Property

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The UK rental market remains buoyant due to the structural undersupply of residential property.

The number of new homes needed in England is estimated to be up to 345,000 per year, accounting for new household formation and a backlog of existing need for suitable housing. In the financial year 2019/20, the total housing stock in England increased by circa 244,000 homes. This is an increase of 1% year-on-year, but the level of supply is still well below the level of housing needed to meet demand, which causes upward pressure on house prices and rental values.

The undersupply of housing presents a real challenge for renters trying to find a property that is within budget, well presented and comfortable and located in the right area. Regency Invest focus on the key cities within the UK where the rental demand is,identifying high specification property with good on-site amenities and in the right location so buy-to-let investors can benefit from excellent rental returns and strong levels of capital appreciation.

As a result of increasing prices and changing attitudes towards renting, it is estimated that UK renters will outweigh home owners by 2039.

Nationwide Regeneration

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The UK has many government-led initiatives to fully realise the economic potential of the whole of the UK.

The Northern Powerhouse is a prime example of a multi-regional area that is the focus of the government to narrow the economic and wealth divide between the North and south of England. Cities such as Manchester, Liverpool, Leeds,Sheffield and Hull are reaping the benefits of this initiative, with substantial private and government investment into regeneration programmes.

The Midlands Engine is another government-led scheme generating added value for the whole of the Midlands, which is home to over 10 million people and 800,000 large and small businesses. Cities such as Birmingham, Leicester,Nottingham, Coventry, Stoke-on-Trent and Lincoln will see the benefits of improved connectivity, regeneration, job market and economic growth.

HS2 is a massive investment in transport infrastructure. Phase 1 will run from London to Birmingham, with Liverpool being connected via the existing rail network and then enhanced by Phase 2. London to Liverpool Lime Street will take just 1 hour 34 minutes, saving 38 minutes. This is the largest infrastructure project in the region. HS2 is expected support over 100,000 jobs, with the Core Cities group estimate of as many as 400,000 jobs. 70% of jobs created by HS2 are expected to be outside of London.

Generation Rent

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Renting is more commonplace across Europe, especially countries such as Germany where 48.1% of households renting their home according to Statista, in contrast to 20% in the UK (ONS).There now appears to be a change in attitude to renting in the UK, with approximately 4 out of 10 millennials living in privately rented accommodation at the age of 30, with nearly a third expected to be renting into retirement.

Home ownership is becoming less affordable with annual house price growth of 7.3% at the end of 2020, the highest in six years. Growth in regular pay in the same period was 0.8% with an average wage of £30,800 meaning that the average house price is nearly eight times the average wage.

Renters are given flexibility by renting, if they aren’t happy with the area, their job requires them to move around, or, break up of a relationship, children adding to the family, they aren’t committed for more than 12-months. The cost of moving in nowhere near as high as if they had to sell their property and buy a new one, with costs including Stamp Duty Land Tax, legal fees for their sale, legal fees for their purchase, agent sales fees, removal costs, repairs to the new property and the list goes on. According to Barclays, the average cost to move home in the UK is£8,885.

Population Growth

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The estimated population of the UK in mid-2019 was 66,796,807 increasing by 361,000 since the start of the year(ONS). It is estimated that the population will exceed 70 million people by 2026 if the population continues on this trajectory and 74 million in the next 20 years.

With 345,000 new homes needed in England to meet demand and the rate at which homes are being built being well below the level of housing needed, this will inevitably create pressure on house prices and rental values.

Regeneration of the North of England and the Midlands, expensive housing in the South of England and more companies either moving or creating regional offices in the North of England is likely to see a migration of the population from the South.

Low Interest Rates

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Interest rates for buy-to-let mortgages are at a record low, with interest rates from under 2%. Some buy-to-let mortgage providers will lend up to 80% of the property value,providing investors with an opportunity to leverage their purchase and get a better return on investment (ROI).

Buy-to-let mortgages have seen more restrictions put in place over the years, with higher deposits required than ten years ago, robust affordability tests to factor in interest rate increases.

The World’s Most Transparent Property Market

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The UK was the ‘most transparent’in the 2020 Global Real Estate Transparency Index (JLL), ahead of the USA,Australia and France.

The UK’s reputation for its transparency in addition to its robust legal system has made it a leading location for investment for UK and international investors, seen as a safe haven for investing hard earned money.

Let’s Find the Perfect Property Investment For You

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Regency Invest have a wide selection of properties across the UK to meet every budget and criteria.Complete our quick and easy 60 second investor form for a personalised recommendation of property investments to suit your criteria.

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