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HMO properties continue to deliver superior yields

HMO properties produced the highest yields in 2017, at 8.9 per cent – according to the latest buy-to-let index from Mortgages for Business.

But while this looks like an attractive investment for landlords, Mortgages for Business points out that yields on this type of property have fallen over the past year.

This is the first time since their Complete Buy To Let Index launched in 2011, that average yields on HMO property have been below 9 per cent.

Yields on multi-units, such as blocks of flats came a close second in 2017, generating an average yield of 8.1 per cent. This was also down on the previous year, where  yields were 8.3 per cent.

In contrast yields on ‘vanilla’ buy-to-let properties generated a lower but more consistent 5.6 per cent return in 2017.

Mortgages for Business sales director Jeni Browne says: “The attractiveness of HMOs as a buy-to-let investment has increased in recent years, not only because of the higher yields on offer but because serious investors are keener to diversify their portfolios.

“With more landlords vying for these properties, prices have been pushed up more quickly than the rents, which is one of the main reasons we are seeing yields drop.”

She added that the fact fewer new HMO licences were granted may also be having an impact.

The average value of a vanilla buy-to-let property was £305,283 in 2017, a 19 per cent decrease on average values in 2016 (£375,409) according this data.

Browne says this indicates that landlords are seeking lower value properties. She adds  anecdotal evidence suggests landlords are increasingly looking further north to purchase buy-to-let properties.

Browne says the benefits of this strategy include paying less stamp duty, future capital growth and scope for rental increases which may allow for slightly higher yields.

Whilst there was no change in the number of lenders operating in the sector in Q4 2017, the number of buy-to-let products in the market continued to rise.

Mortgages for Business says there has been a 444 per cent increase in the number of since 2011.

Browne adds: “It is widely anticipated that buy-to-let lending will contract this year in response to the tax and regulatory measures being imposed on the sector. I would expect product number to peak in Q1 2018, and we have already seen some lenders trimming their ranges leaving a core of products designed to reflect the changing needs of landlords.”

Source: Mortgage Strategy

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Student Property Investments On The Rise In 2017 Due To Strong Yields

Student Property Investment has risen in 2017 due to the strong yields offered in university towns and cities coupled with a weak pound.

New research from Savills’ has revealed that investment in student property will reach £5.3 billion by the end of 2017. This marks a 17 per cent increase in comparison to 2016. The research suggested that Brexit may have added to the appetite for UK student housing after £2.1 billion was transacted in the sector after the referendum in comparison to £1.9 billion earlier in the year.

The growing demand for investing in student housing assets has outgrown the supply of available stock. 25 per cent of the £4.5 billion traded by Savils last year involved forward funding developments, whilst existing stock made up just 69 per cent of trades. This marks the lowest proportion on record.

The Mistoria Group, specialists in high yielding investment property, supported the high growth results, having seen demand for student property in the North West rise 38 per cent year on year. This was fueled by an increase in investment from Turkey, which accounted for 20 per cent of the growth. The UAE accounted for 9 per cent and Hong Kong at 5 per cent.

Managing Director of The Mistoria Group, Mish Liyanage, commented: ‘We have seen a large increase in international investors’ appetite for student accommodation.  They are attracted to the UK because of the relatively low-cost student property on offer and the excellent net yields that range between 12 per cent and 15 per cent in the North West. Investors have a wide choice of accommodation to chose from, such as HMOs to purpose-built accommodation. There is a general shortage of student accommodation across the UK and especially in university cities such as Liverpool and Plymouth. In Liverpool, there are now 21,700 PBSA units, meaning 2.1 students for each unit. With supply of a further 12,400 units either under construction or with planning permission, this ratio just 1.4.’

He concluded: ‘Liverpool is a great university city to invest in. An HMO property with a superior spec can deliver investors an average gross rental yield of 13 per cent, leveraged return on investment of 35 per cent plus, before any charges and voids.  A three bed HMO which houses three students, can be bought from £120,000 upwards in Liverpool.  The return on investment is very attractive too, with 13 per cent (8 per cent cash rental and 5 per cent capital growth). The gross rent on the property will exceed £1,235 pcm, as each room is rented out.’

Source: Residential Landlord

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Demand for buy-to-let property in North West is soaring

Demand for buy-to-let property in the North West has soared by 38 per cent year on year, according to the Mistoria Group.

Cities and towns are proving to offer the best opportunities, with yields of 7.08 per cent in Salford, 5.96 per cent in Leeds and 5.79 per cent in Manchester, new research by the specialists in investment property shows.

Manchester is in the Top 10 buy-to-let postcodes in the UK, with rental price growth of 7.53 per cent and yields of 6.11 per cent.

The resilience of the property market in the North West has been boosted by regeneration which has bought new jobs, transport links and a range of large housing projects.

Mish Liyanage, managing director of the Mistoria Group, said: “The housing market in the North West is stable, proving the strength of the property market and economy as a whole, in this region.

“The Northern Powerhouse offers investors unbeatable buy-to-let opportunities, way ahead of London and the South East. Affordable property prices and a booming economy is drawing students, families and professionals to the region.”

HMOs in Liverpool and Salford are proving popular with investors, as both cities have a high population of students and young professionals.

Because Article 4 is not in operation in these cities, investors are able  convert a family home, or a home used by a single person (C3 -dwelling house/flat) to a small shared house of up to six unrelated individuals (C4 –HMO), without any planning permission.

A HMO property can deliver landlords an average gross rental yield of 13 per cent before any charges and voids.

A three bed HMO for three students, which can be bought from £120,000 in Liverpool, will see gross rent on the property in excess of £1,235 pcm.

Source: Simple Landlords