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Buy to Let Hot Spots for Investment

Deciding where to purchase your buy to let property is as important as choosing the property itself, as it can determine the success of your investment. Often, areas tipped to be getting significant investments in infrastructure are considered hot spots for landlords. Sales Director, Jeni Browne, explains what you should consider before you do...

It’s usually a safe bet that an area which has large infrastructure plans in the pipeline – such as a Crossrail station – is likely to see increases in property prices. This is because with new developments come new jobs, more people moving to the area and therefore, a higher demand in property, whether rented or purchased.

Why is this important to landlords? By identifying these areas early and purchasing a property before they increase in price, you’ll get high returns on the property value in a short amount of time. You’re also likely to see higher demand for rented accommodation as people move into the area, meaning a steady flow of tenants and rental prices going up too.

However, it’s not always that simple. While properties in the immediate vicinity to planned Crossrail stations have increased in value by 83.9% in the decade since the project was first announced (compared to just 56.7% in the wider areas), values for houses within 500m of these stations have fallen by nearly 7%, with buyers put off by possible disruption.

Ladywood in Birmingham has seen a 17% house price increase since the HS2 announcement, spurred by large companies such as HSBC, PWC and Deutsche Bank opening large office bases there. The corporate investment and subsequent demand for housing have driven up both the value and rental rates of property in the area.

When to buy property in ‘hot spots’, however, is a balancing act. In 2012, the plan to build ‘The London Resort’ Theme Park in Swanscombe Kent was announced, set to open in 2024. Fast forward to 2020 and the project is still in planning, although the final planning application should be submitted this coming summer. If the plans go ahead, it will be a great asset to the area, bringing in thousands more jobs and tourists. Conversely to the HS2 regions, house prices in Swanscombe fell by 0.7% in 2017-18 and again by 0.33% in the final quarter of 2019. For any investors who bought property here in 2016, hoping to make a quick buck after the arrival of the resort, this is not exactly great news, and they’re likely feeling quite nervous waiting for the plans to go through.

Besides property values, this can also be an issue for rental prices and demand. Let’s use The London Resort as an example: once thousands of new jobs have been created, and things are up and running, finding tenants for your buy to let investment should be quite straightforward. However, this is currently still a few years off, especially as the plans haven’t officially gone through yet. Meanwhile, investors will be piling into the area, putting a swathe of rental properties into the buy to let market... for who? Is there sufficient demand now to fill these properties? The danger is that you end up with frequent or more extended vacant periods, covering the mortgage yourself.

In terms of getting a mortgage in these hot spots, you shouldn’t have an issue. Lenders will value the property at the current value (not predicted) and may be cautious about over-inflated prices at risk of coming back down. We wouldn’t expect to have any issues sourcing a lender for properties in these areas.

As with any investment, there’s always an element of risk. Buying up property in areas which are about to receive vast amounts of investment and new infrastructure can be immensely profitable, relatively quickly... however, as an investor, it’s essential to see the whole picture and a balanced view of the risks involved in these types of property investments.

If you’d like to discuss any issues raised above or need help finding a buy to let mortgage, please do not hesitate to contact me, Jeni Browne, on 01732 471647 or email jenib@mortgagesforbusiness.co.uk.

 

Sources: Property Investor Today, Kent Online, SevenCaptial

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NB: ANY PROPERTY USED AS SECURITY, WHICH MAY INCLUDE YOUR HOME, MAY BE REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS ON YOUR MORTGAGE

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