The Buy to Let sector in the UK has suffered during the economic downturn, with lending restrictions, repossessions and unemployment all taking their toll on the market. Many who bought property to rent out during the years when finance was readily available found themselves unable to keep up with repayments when the country's economy worsened and as a result, many casual investors exited the Buy to Let arena.
Co-founder of the Hampshire and Home Counties Property Networking Club Hazel Reed stated earlier this month that finance had been too easy to access and welcomed the more stringent lending conditions now being placed on Buy to Let mortgages. However, she was upbeat about the prospects for the sector in the long term, pointing out that with first-time buyers also struggling to afford home purchases, the rental market is set to expand.
Independent property expert Malcolm Harrison made a similar assertion, adding that for established investors there are means to fund Buy to Let purchases, but the need for a significant deposit is a stumbling block for many who may want to enter the sector for the first time. Another potential hurdle facing those looking for property investment opportunities in the UK is house prices. Although values have fallen slightly, there have not been the significant drops experienced elsewhere around the world - which may mean savvy investors are looking overseas for Buy to Let opportunities.
The US is a prime candidate in this regard - unlike in Britain, property values have plummeted and there are some bargains to be found for investors willing to do a little leg work. Figures released by the National Association of Realtors (NAR) in May this year revealed that the value of residential sales to international buyers rose by 16 billion USD (9.9 billion GBP) in the 12 months ended March 2011, compared to the 2009-10 tax year.
NAR president Ron Phillips commented: "The US has always been a desirable place to own property and a profitable investment. In recent years we have seen more and more foreign buyers coming here to take advantage of low prices and plentiful inventory." In terms of where people are making purchases, Florida tops the list, followed by California, Texas and Arizona.
Paul Collins, editor at BuyAssociation, recently claimed that popular holiday destinations, such as Florida, will continue to do well with overseas investors. He stressed that there is "still strong interest in the US market", adding that it "could still be very profitable", particularly in regions with a thriving and well-developed tourism industry.
Meanwhile, the Knight Frank Global House Price Index, which was published on June 17th, showed that the US had registered one of the largest declines in residential property values of the 50 countries surveyed, which could add to its appeal. Annual prices fell by 4.9 per cent year-on-year and NAR reported that 62 per cent of foreign investors were cash buyers in the 2010-11 financial year, citing issues with obtaining mortgages as one of the biggest barriers to overseas buyers.
And if analysts are to be believed, the US property sector looks set to be a target for investors for some time to come. A panel of experts at the Reuters Global Real Estate Summit 2011 - held between June 20th and 23rd - selected the nation as a top location for buyers, noting that prices have yet to recover in many major cities.
Scott Latham, vice-chairman of Jones Lang LaSalle, told the conference that in America "yields are still quite affordable and property values, which have recovered [...] represent good value". Treasury China Trust chief executive Richard David agreed with Mr Latham's assertion, adding: "You look at some of the prices of real estate in the United States and you would like to think there is significant gains to be made as they come off their lows."
*This page is provided for information purposes only and should not be construed as offering advice. IPIN is not licensed to give financial advice and all information provided by IPIN regarding real estate should never be treated as specific advice or regulations. This is standard practice with property investment companies as the purchase of property as an investment is not regulated by the UK or other Financial Services Authorities.
Other articles of interest
The buy to let investment option has grown increasingly popular in the last few years, despite the global economic downturn. But, as with any other type of investment, there are a number of pros and cons which need to be weighed up before you dive straight in.
A traditional Buy to Let lender will want rent to cover 125% of mortgage repayments. Many also look for a 15% deposit to protect against decreasing prices and as much as 25% (often more), especially during tougher times.
It’s not surprising that thousands of investors looking to secure an asset in the property sector opt for the Buy to Let investment option every year. It can generate an excellent second income as well as help to diversify a property portfolio.
Securing a buy to let investment is still one of the most popular ways to generate an income as well as diversify an asset portfolio...
If you’ve been considering making a buy to let investment and have already started doing your homework, you’ll no doubt have noticed that the banks are currently offering an impressive array of buy to let mortgage products.
Many people will tell you that buy to let investment is a simple case of buying a second property and renting it out to the locals. This is true to a certain extent, and some people who go into it in this way do fine. Others lose everything...
Buy to let is one of the most difficult forms investment, it can and does quickly become a disaster for those who don't go into it properly...
Buy to Let investing is often underestimated; people think they can just remortgage, buy a second home and pay off the mortgage by renting it out. This works fine until the professional bad tenant comes to stay.
Buy to let investment is a misunderstood fellow. One of the riskiest forms of investment, buy to let investing is often underestimated, many people believe it is easy and far too many people think it is just a case of buying a property and renting it out...
The most important measurement of a buy to let investment is its rental yield. This is the amount of money the property is capable of earning in rent each year, as a percentage of the property's purchase cost.