Since the economic downturn, UK investors have been a little quiet. Many have had their fingers burned when it transpired that the value of property really could go down as well as up. Those who had invested sensibly opted to sit tight on their portfolios and in any event the banks had lost their appetite to offer good buy to let mortgage products with the LTV value rates slipping to an all time low.
Unfortunately this has meant a difficult period for most areas not well known by the international community. London seems to be able to shrug off what happens in the rest of the UK, particularly in the prime central London areas which have increased in value significantly over the last five years.
While this may seem an obvious state of affairs, there are some elements that don’t quite fit what you might expect from an investor.
Yields in the prime central London area are poor. Even outside of the prime areas they are not something to get too excited about. Yields tend to languish around the 3% mark with some units slipping well below this. This is even more concerning when considering the capital value of property in the London market. Compare this to Kent where the recent Berkeley Scheme was able to enjoy yields in the 6% – 7% bracket. Capital values were sitting at around 15% of that of a London alternative. This provided the opportunity of outlaying a similar amount of capital but owning 6-8 individual units, all offering a much higher yield and reducing the potential exposure to void periods.
Capital appreciation is of course why most investors look at property. The rental will hopefully cover the monthly payments and after a 5-10 year period the property can be sold with generous increases brought about on the back of the appreciation expected.
This is all well and good but as recent experience has shown us, capital can just as easily depreciate and when looking at the world stage it seems more likely to.
Where then would you invest? In an area that has seen non-stop growth for the last five years and has priced out the local market both in terms of buyers and tenants? Or would the most astute investor be looking to pick up property that has not seen any increase but sits in an area quite likely to see some change?
Taking Kent as an area you only have to look at the stations during commuter times. Platforms are packed with people who have been forced to find a more financially viable solution to the cost of living in London. These areas are priced significantly below London levels and yet offer a reasonable commute into town. These areas have also seen a significant capital value decrease over the economic downturn.
Furnishings. A much smaller point but in London the corporate market demands furnished units. With the vast rentals being paid, the furniture needs to meet the expectations of prospective tenants. This often costs between £10k and £50k and represents a sizeable % of the total capital value of an investment in the Kent area.
When taking these points into account it’s pretty clear to see that there are compelling reasons to consider investment outside of London.
Why not speak to your local Regal Lettings office to find out what investment opportunities we are currently recommending.