Assetz puts the rise down to investors being drawn into the market by potential rental yields of between 6.5 per cent and 9 per cent in student and commerical property.
Despite an upturn in house price growth this January, most investors returning to the market with renewed confidence are taking a much longer-term view. No longer tempted by the prospect of instant capital gains, the projected rental yield of the property is proving a much bigger selling point, suggesting that buyers are looking to keep their investments into retirement. When the mortgage is paid off, the property will generate a regular rental income to supplement their pension.
Stuart Law, managing director at Assetz, commented: “People are becoming noticeably better educated about property investment. Many have been burnt in the past after hoping for quick capital gains and are now more knowledgeable about making a buy-to-let or other investment property work for them in the long term. Investors must always balance the potential for capital growth with the need for long-term income in order to minimise risk and help them achieve an early retirement date.”
The first building released in a development of student apartments in Dundee, which launched at the beginning of January, sold out in one week. A similar development is currently for sale in Sheffield, consisting of off plan apartments in the S3 regeneration area of Sheffield, close to Sheffield Hallam University. Prices start at £93,365 with only a 5 per cent deposit required.
Assetz is very keen on regeneration areas as a way of reducing reliance on house price growth. As the redevelopment of an area approaches completion prices will tend to rise into the city average, giving greater growth potential than the city as a whole. Halifax predicts a 3 per cent rise in property prices in this area of Sheffield during 2006, building in additional equity.
Stuart Law continued: “The high yields offered by commercial property syndicates are also proving attractive to investors with a long term view. Office buildings with good-quality tenants already in place are popular, generating yields of around 7 per cent. Once the rent has paid off the mortgage, usually over 15 to 20 years, it can be distributed to investors as income, or the building sold according to the wishes of the syndicate members. A £35,000 investment in this type of syndicate could produce an income for life of around £7,000 per annum once the mortgage is paid off, a considerable attraction to most investors.”
