Property investment in the UK remains a popular way of earning a long-term income or achieving a lump sum profit upon sale, thanks to the strength and resilience of both the traditional housing market and the rental sector. In the current climate, location and property type are particularly important for investors.
In recent times, there’s been a fascinating shift in the property investments that people are leaning towards. The allure of property investment in the UK hasn’t waned, primarily because of the robustness of the conventional housing market and the thriving rental scene. For those thinking of diving into the property investment pool, it’s crucial to be aware of the significance of both location and the nature of the property.
A Closer Look: What Research Tells Us
Research by Castle Trust Bank, a specialist lender, offers a glimpse into the current trends and preferences of investors, highlighting the most popular property investment types and those that have lost steam.
1. Refurbishments Take the Crown
Refurbishment tops the list, with a whopping 40% of brokers mentioning it as their clients’ current favourite.
The rising trend towards refurbishments might hint at investors’ quest for a good deal: acquiring properties at a low cost, renovating them, and then quickly selling them off for a profit—a strategy commonly known as ‘flipping’. However, while popular, it carries its own set of risks.
2. The Lure of High Yields: HMOs
While many are looking at refurbishments, there’s another group prioritising consistent returns over potential capital gains. This mindset can be attributed to increasing mortgage rates, which cut into monthly profits. For those seeking a steady, long-term source of income, renting out properties in high-yield regions appears to be a golden strategy.
One standout in this category is the Houses in Multiple Occupation (HMOs). These have gained significant traction lately, shedding their past image, thanks to the rise of premium HMOs catering to professional tenants. The unique advantage of HMOs is that each room generally has its own tenancy agreement, which can translate to higher yields than the usual buy-to-lets.
3. Diversifying with Multi-Unit Freehold Blocks (MUFB)
The third preferred investment type is the MUFB. Think of it as purchasing one property that houses multiple separate spaces—for instance, an apartment complex or a revamped house. A primary advantage of MUFBs is the diversified income they generate from each unit. This means that even if one tenant moves out, the income from the other occupied spaces continues, reducing loss from vacancies.
However, not everything is on the rise. Furnished holiday lets or short-term rentals seem to be on a decline, having previously enjoyed a boost post-Covid.
The Shift in Lenders’ Priorities
As the market sees more competition among lenders, there’s a nuanced shift in investor behaviour. According to Anna Lewis, commercial director at Castle Trust Bank, investors are valuing trustworthiness in a lender more than just the best rates. The emphasis is now on swift decisions and reliability.
She points out, “With the fluctuating rates and prevailing uncertainties, quick decision-making can often influence the rate a client manages to secure. In a race-paced market, quick responses enable investors to seize market opportunities and expand their holdings.”
Yet, a word to the wise: while specialist mortgages might be tempting, they usually come at a higher cost than traditional ones like standard buy-to-lets. This underlines the importance of getting expert advice to ensure you’re on the right path.
Conclusion: Stepping into the Investment Journey
The property investment terrain in the UK is ever-evolving. From refurbishments and HMOs to MUFBs, the choices are diverse. As with any financial endeavour, it’s crucial to be well-informed and seek professional advice. Here’s to making savvy property investment decisions!