Riding the Property Investment Wave

The current economic climate may have dampened the spirits of some in the property investing world, but there are silver linings to be found. David Coughlin, Managing Director of HBF Investments, explores the current residential property market and offers his insight into why the current market offers a unique time to buy, what investors should be looking for, what to buy and the yields that could be achieved. 

The property market in the UK has undoubtedly suffered due to the recession, but compared to other forms of investments, such as stocks and shares, investing in property is still a very viable option. In fact, there are still plenty of benefits to be had from buying property now – if you have the relevant knowledge and know how about where and what to buy.

The property market has hit rock bottom this year and, although this isn’t great for anyone trying to sell a property, it’s these unique circumstances that have created a prime opportunity for savvy property investors. In fact, investors are able to purchase property at 25% to 50% discount, which offers a fantastic property investment deal. For investors keen to make the most of the market situation, then now is a great time to purchase property.

Property discounts are available on a range of different types of residential property.

Outside London, many new build developers are selling properties at a discount and they can typically be purchased for 35% to 50% discount. In places like Leeds, Barretts have been selling off their stock, for example at the Echo development, for up to 40% to 60% off previous list prices.

Lenders are very willing to sell repossessed portfolios at 25% to 40% discounts. Individual residential property vendors are willing to accept 20% to 30% off the asking price for a quick sale, even when they’re not in financial difficulty.

Exactly what investors should buy will depend on their own investment portfolio and property investment aims. If they’re interested in discounted property, then there are some really good deals on quality tenanted property available, many of which can’t be sourced through traditional estate agents and need the help of a specialist company, like ours, to acquire. 

The yields are now fantastic and stand at about 8% to 12% for many northern towns. This is especially true for three to four bedroom terrace houses that can be purchased for a discount for around £60,000 to £80,000. The local housing allowance (which increases as the number of bedrooms increase) will pay on average £500 to £750pcm – in some cases, a figure that’s far higher than private lets – which gives investors both security of rent and great yields. With mortgage rates standing at about 6%, investors end up with a healthy profit.

Not surprisingly, London still seems to be a location that many property investors are interested in, but there are very few rock bottom deals to be had in the city. Many investors are still willing to pay a premium for property in London and seem keen to buy without a discount, as long as the yield is good (8% to 10%) 

Generally speaking, we find there is also a lot of interest in property in all southern locations. In the north, properties are generally easier to source and there’s a lot of choice for investors in the North West and North East, where prices are cheaper. We’ve noticed that investors want to balance their portfolios by purchasing properties in potentially higher growth and more affluent areas in the south with lower priced and higher yielding properties in the north.

By and large, we only see lower interest in poorer northern towns and very remote areas where properties are difficult to rent.

At HBF Investments, we’re currently seeing a massive upturn in investors wanting to buy into the property market. In fact, with the increased demand, many sourcing companies and investors are reporting a lack of available property stock. This reflects what is being seen by estate agents and is slowly driving up property prices as a whole.

However, a lack of mortgage lending means that it’s still only a very small group of investors who are able to fully take advantage of the current discounts available to property buyers. When mortgage lending begins to return to normalised levels, the 20-255% discounts being achieved currently will begin to reduce and prices will start to increase again. 

The overall situation we’re seeing today creates a great opportunity for savvy investors to buy in at the bottom of the market at great discounts and catch the next wave of price increases – a scenario that only comes around once or twice in an investor’s lifetime. The question is, will you be riding that wave?

Source:   David Coughlin is Managing Director of HBF Investments

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