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6 min read

Investor Insights - the property market fundamentals when making investments in 2021

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Investor insights - property market fundamentals

No matter what kind of property you are looking for, there are a whole range of investment property considerations that you must take into account. To assist you, we have spoken to our expert property consultants and gathered some fundamental investment principles that are suited to all types of property, all locations and all price ranges.

While you do not have to tick all of these boxes before buying, we believe that they make up the basis of any UK property investment, and if you follow them you will be far more likely to find success.

Here are some of the most important considerations from our team…

Rental demand

The first property fundamental is the most important – you should make sure that you research the location and rental demand thoroughly before investing. It sounds like an obvious point, but it is a principle that will never go out of date.

Does the area contain a high proportion of younger people who are more likely to rent? Are local agents receiving a high number of enquiries about their properties? If you are unfamiliar with a market, it is a good idea to find a local property expert to talk to who can give you the most up to date information about the market.

You should also be aware of longer term rental trends in your desired location. Demand goes up and down depending on a range of factors including the local economy, infrastructure investment, job prospects and much more. A market with high rental demand today may not be the same in a few years’ time.

We would advise looking into population projections covering at least the next five years before deciding to invest. You can do this by either going directly to the population projections provided by local councils or by considering other factors which may have an effect. For example, a city like Manchester regularly sees new multinational businesses moving into its city centre, bringing more jobs and more people.

Buying property where people are going rather than where they are now is a reliable guideline that is likely to lead to success. The London market offers a cautionary tale in this regard. For many years the capital city has been considered the UK’s premier property investment market, but in recent years the decline has been stark with both house prices and average rents suffering. However, those watching population trends will have had advanced warning of this – many thousands of people are leaving London for regional cities like Manchester, and they have taken with them the vibrancy and upward momentum that used to define the capital’s housing market.

Location

The second fundamental principle of investment shared by our expert consultants is that you should aim to purchase property near the amenities that people want the most. Another point that seems simple, but is easily forgotten and is at the root of any potential investment.

Good connectivity is highly prized by all kinds of tenants. Properties close to good train connections will always command higher rents. Likewise, if the place you are considering has good bus or tram networks then proximity to stations and stops will be preferred by tenants.

Green space is another strong influence on rents, particularly in city centre areas where apartments dominate and the vast majority of properties don’t have their own outdoor spaces. Properties within walking distance of a park will always attract a wider pool of potential renters, thereby reducing the possibility of void periods and increasing the competition which will eventually lead to higher rents.

If you would prefer a particular kind of renter, you can search for a property close to amenities which might appeal to them specifically. A good example is that if you are looking to rent to a family, it makes good sense to purchase a property which is close to schools with a good reputation. If you can find an area like Altrincham which is home to good schools for children of all ages, you could potentially even secure a long-term tenant who will stay in your property and take care of it for many years.

Buy below market value

Your rental yield and potential capital appreciation depend to a large degree on how much you initially pay for your property. The less you pay initially, the more profit you will be able to make.

This can be achieved by negotiating downwards with the seller at the point of purchase or by identifying an up-and-coming area with significant growth potential. However, our property experts suggest a third method – buying property off-plan.

By purchasing off-plan you can lock in a price that will be notably under the market value when the development completes. This means that you will begin accumulating capital appreciation even during the construction of the building, generating a return on your investment immediately.

The lower entry prices for off-plan property also mean that you may be able to secure a more desirable property in a more popular area, eventually enabling you to charge higher rents when the time comes to let it out. This is especially true in city centre areas where purchasing a luxury apartment is as close as you can come to guaranteeing high, long-term rental prospects when it comes to UK buy to let investment.

If you can manage to combine these two strategies in a single purchase – by purchasing off-plan in an up and coming city with lower entry prices and a bright future – then you can multiply your profits even further. A good example of this is Preston which is at the beginning of an investment boom and has a severe lack of luxury accommodation in the city centre. As the economy grows, businesses move in and young professionals flock to the city, investing in premium apartments in Preston is sure to provide high long-term returns.

Furthermore, by purchasing off-plan you can normally pay in instalments over the course of the build rather than being liable for the entire lump sum in one go. This protects you from a certain amount of risk and gives greater financial security.

By researching where rental demand is increasing, finding the right location and buying below market value, you can give yourself the best chance of success when investing in UK property.

Ronald Garrett, Managing Director of Alliance Investments, said: “There are very few mysteries about property investment which cannot be solved by sticking to the most important fundamental principles and doing your research. Taking expert advice before purchasing is perhaps the single most effective way an investor can increase the chances that their purchase will be a success.”

We hope that you found these Investor Insights useful, and if you need more information about investing in UK property, please get in touch with our team today >>

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Mallam Grant
Ginny Wai 2
Conor Armstrong
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