UCB reveals buy-to-let research

Amanda Jarvis

May 9, 2006

The early results point towards continued growth in the sector, with some parts of the country performing particularly well.

Current property investment hotspots highlighted by the report include:

– Swansea: The next big focus for buy-to-let activity in south Wales, partly due to regeneration of the docks.
– Colchester/Chelmsford: Reasonable house prices and good connections with London are boosting sales of buy-to-let property.
– Rugby: Expansion of the rental market is boosting investment in property.
– Belfast: Expansion of the rental market, partly due to the increase in overseas workers, continues to stimulate the hotspots of Dungannon, Cookstown and Craigavon.
– Bristol: Good demand for properties to rent and high confidence among prospective buy-to-let landlords.
– Peterborough: Northern parts of the city are seeing the highest level of demand from property investors and Bretton is particularly popular.

In many major city areas, the level of purchases being made by landlords varies considerably. Cities with mixed levels of activity include:

– London: Areas of east London are currently proving popular and prospects for the Olympics are helping to boost interest. The increase in the size of the rental sector, due partly to would-be first-time buyers who cannot yet afford to purchase and are therefore renting at present, is also helping to support the market, and there has been a surge of interest in prime central areas. However, in some areas, high prices – and consequent low yields – are still dissuading landlords from making purchases.
– Leeds: Buy-to-let investment is active on the outskirts of Leeds but is fairly static in the centre.
– Birmingham: Whilst areas such as Harborne and Erdington may not always produce sufficiently high rental yields, other areas such as Kings Heath, where development projects are taking place, offer potential.
– Manchester: The buy-to-let sector is picking up in comparison to last year, but rents are fairly static, especially in the city centre. The best deals are in less expensive parts of the city, particularly regeneration areas.
– Edinburgh: Increased prices have put pressure on rental yields in the more expensive areas of Edinburgh, but there is continued rental demand from both local and foreign residents, many of whom are students.
– Glasgow: Many property investors have turned their attention to Glasgow, where investments in the less-expensive areas of the city are producing better returns. However, in more expensive areas, such as the Harbour/Riverside, returns have been lower and not all properties have been holding their value.

Keith Astill, managing director at UCB Home Loans, said: “Investment activity in buy-to-let property has been particularly strong over recent months, reflecting the trend seen in the second half of last year, when lenders advanced a record 130,400 loans – 39 per cent higher than in the first half of the year.

“Activity in the first few months of this year has seen renewed interest in parts of central London, an area which had previously been relatively quiet due to the high level of house prices. In some respects this is due to the fact that other areas of the country have now caught up with the price rises shown in the south of the country a few years ago, and we now have a more even picture across the UK when landlords are looking for areas in which to invest. Overall, our research indicates that landlords are taking a long-term view of at least ten years when considering the return they will make from a property investment.”

The full half-yearly report on the buy-to-let sector, which includes detailed commentary on over 60 UK towns and cities, as well as figures and predictions for the rental sector, will be published by UCB Home Loans at the end of May.

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