If you are one of the buy-to-let investors hoping to beat the 1st April Stamp Duty deadline, you will be seeking a solid investment property with strong rental returns in the near future.
To avoid paying an extra 3% in Stamp Duty, landlords must complete on a buy-to-let property purchase before midnight on 31st March 2016.
Positively, there are good investment opportunities across the whole country, whatever your budget. However, it is important to remember that you must look for both high rental demand and the possibility of house price growth in the area you choose.
If you do not have the budget to invest in London’s spiralling housing market, here are five buy-to-let property hotspots outside of the capital:
Bristol – £350,000 budget
House prices in Bristol surged by 11.2% in 2015 to an average of £238,200, according to Hometrack’s latest UK cities price index. This growth is stronger than in Oxford or Cambridge, and is not far behind London’s 13.3% rise.
The Head of Residential Development Sales at Savills in Bristol, George Cardale, recommends either a safe bet property in a prime central location, such as Clifton or the Harbour, where a two-bedroom apartment costs between £350,000-£400,000, or a gamble investment in an emerging location outside of the city centre, where prices will be lower and yields higher. If you choose the right area – Cardale suggests Easton or Bedminster – there is the potential for higher capital growth, too.
“Because of the university, Bristol has a large student population, many of whom remain in the city after graduation,” explains Cardale. “It is a solid employment centre, especially for professional services and finance, and is far enough from London for many companies to have headquarters in the city.”
He adds: “Bristol offers an attractive lifestyle – it’s somewhere people want to live.”1
Birmingham – £250,000 budget
High speed is coming to the Midlands and major firms, such as HSBC, are relocating – could Birmingham be any more of a property hotspot right now?
Over the past ten to 15 years, the city centre has experienced great regeneration, causing prices to increase by 10% in the last 12 months alone, according to Knight Frank.
A two-bed flat in the trendy Jewellery Quarter will cost around £250,000 and Raj Bedi, the Managing Director of Martin & Co Birmingham, believes that a yield of 6-7% is achievable for landlords.
If you are seeking an up-and-coming area, the Gun Quarter in the northeast of the city centre offers two-bedroom flats for around £200,000, as ex-munitions factories are rapidly turned into apartments.
If you’d rather target the family market, Bedi recommends green Edgbaston, where a four or five-bedroom detached house costs about £400,000. There are good schools nearby and plans to upgrade shopping and healthcare in Edgbaston.
Basildon, Essex – £200,000 budget
The property market is booming in Basildon – prices rose by 11% during 2015. However, the average house price is £214,392, meaning you can purchase a good flat or even a small house for around £200,000.
The National Field Manager at House Network, Ian Marston, claims that an investment in Basildon will pay dividends, with plans for a major regeneration of the town centre and several large developments on their way. It is also just 40 minutes from Fenchurch Street station.
“The area has something for everyone, with a world-class sporting village used for the 2012 Olympic Games, vibrant nights out at Basildon Festival Leisure Park and close links to nearby trendsetting areas, such as Leigh-on-Sea,” says Marston. “It is ideal for young professionals wanting something quick on the commute but close to a town centre, or for growing families who want to take advantage of some of the local parks or recreational activities.”1
Marston expects yields of 6%+ to be achievable on a two-bed flat, or 5.5% on a three-bed house.
Brighton & Hove – £150,000 budget
Investing in this continuously booming London commuter spot is a lot cheaper than buying property in the capital itself, with the possibility of finding a one-bed flat in the centre for £150,000, likely to earn a monthly rent of £650.
Sally Fraser, a buying agent at Stacks Property Search, comments: “This bottom end of the rental market is always in demand with tenants, as their budget does not stretch very far in the town centre, so voids in the tenancy tend to be few and far between – a vital part of a successful buy-to-let.
“Many landlords have been achieving an increase in the rent with the student market of about 5% year-on-year, offering a return in the region of 5-6%.”1
If you are looking to invest in student accommodation, look for a central location with good transport links to both the city centre and the University of Sussex campus.
Also, wherever you invest, remember to protect your rental property with rent guarantee insurance, which ensures you still get paid if your tenants default on payments.
Carmarthen, Wales – £75,000 budget
If you are hoping to keep entry costs as low as possible, Carmarthen is the perfect spot – you can find a three-bed terraced house in the centre for £70,000-£80,000.
The Managing Director of West Wales Property Finders, Carol Peett, recommends the area because of high rental demand from students at the University of Wales Trinity St David campus.
Demand for larger homes will also rise, she says, as the West Wales General Hospital is expanding and the S4C TV studio is relocating from Cardiff.
“The large £74m St Catherine’s Walk shopping centre has brought a new vitality to the town and it is the chosen place to live for many who work in Llanelli, Swansea and even Cardiff,” she explains.
“The proximity to glorious beaches and stunning countryside, as well as the theatre, restaurants, art galleries and great shopping, make it a popular place for singles, families and retirees.”1
Whatever type of property you are searching for, you can find great prices: Three-bed semis cost around £115,000; a four-bed detached house costs less than £200,000; and a Georgian four-bed family home can be bought for under £300,000.
However, be aware that Wales has struggled to recover from the recession, meaning high capital growth may not be possible in the near future.
Wherever you are planning to invest, remember that buy-to-let property purchasers and second homebuyers will be charged an extra 3% in Stamp Duty on homes costing over £40,000 from 1st April.