Is now the right time to invest in buy-to-let?

Craig Upton, marketing director of UK Property Finance

New research from The Halifax reveals that UK house prices set a new record after four months of falls, with a 1.6% rise in July up from £237,834 in June, raising average property values to £241,600.

House prices have risen 3.8% year-on-year in a surprising spike after the market was put on pause earlier this year. This mini boom has pushed average property values up by 1.6%, or £3,770, month-on-month in July. This was the first increase in prices reported by Halifax in five months, which bases its index on mortgages it has approved and meant the annual rate of growth increased to 3.8%.

Most industry experts expected property prices to plummet during the height of the coronavirus crisis, but this turned out not to be the case. Instead, they have continued to climb at a slower pace than normal and this recent spike is an early sign that some semblance of ‘normalcy’ is returning over the coming months and years.

Lower property values than what would have been expected at this juncture in 2020, combined with extremely low interest rates, rising rent prices and excellent capital growth prospects, is providing landlords and first-time investors alike, with a golden opportunity.

The last 20 years have seen an explosion in buy-to-let investors, the vast majority owning one or two properties, powering a significant part of PRS growth. Figures from 2018 show that the Private Rented Sector provides homes for over a fifth of the population, more than 4.7m households, making it bigger than the Social Sector and it’s doubled since 2002.

For several years now, the UK has been widely regarded as a haven for buy to let investment. From casual investors with just a single rental property, to those with extensive portfolios spanning the British Isles, skyrocketing rent prices have attracted investors from near and far.

It’s also widely predicted that impaired job prospects and economic uncertainty for many will drive up demand for rental properties. It’s likely to be some time before the British public have the financial confidence needed to make major purchase decisions, further increasing demand for rental properties.

Whether investors are considering their first buy-to-let venture, or looking to expand an existing portfolio, the aftermath of the Covid-19 pandemic could be quite beneficial for some. Many experts across the UK are expecting a boom in demand over the coming weeks and months, which will result in soaring demand for rental properties and a spike in average rents.

UK Property Finance is a whole of market finance broker specialising in the provision of niche property finance such as bridging, all types of mortgages, second charge loans, development finance, commercial finance & equity release.