The London Myth Broken

Posted on 7th April 201517th February 2017 by Aspen Woolf UK

“Average gross yields of 8% in Manchester compare to 4.5% in London, while a typical two bed investment property costs in the region of £90,000 versus £300,000 in the capital.”

London has always been a hot topic in property investment. But is it really worth the hype?

London always had and most likely will always have demand when it comes to housing. Whether you are based in England or beyond, a quick look at England’s capital will show you that property prices are buoyant, disproportionately so to the rest of the UK. But that doesn’t automatically mean it is a great place to invest.

Of course this all depends on your personal strategy and why you are investing in property in the first place. Whether you are employed or a full time investor, one should recognise the importance of cash flow in property business. Without significant cash flow a portfolio can easily fall into financial difficulties and risk the whole business and portfolio.

When it comes to facts, the costs of buying property in London is much higher than in anywhere else in the UK. While house prices have risen, rents haven’t. At least not near enough to facilitate a good rental return. This leaves an investor with a rental yield far below that which is achievable from other UK cities. A higher purchase price and high mortgage means more pressure on you, as the landlord and investor, to squeeze profit out of the rental income.

Add to this a recent report published by the Office of National Statistics, 58,220 people aged from 30 to 39 left London between June 2012 and June 2013; a record number, and a 10% increase on 2010. Escaping the rat race for the fresh air of the countryside. A huge number are moving to smaller cities that have ten times the charm: Manchester, Birmingham, Leeds, Sheffield, Liverpool and Newcastle. They are no longer willing to be hoodwinked into believing that London is the only place in the country with museums and culture. People simply can’t afford to keep up with the prices and it seems they are no longer putting up with it. Forsaking a “higher” London salary for more spacious houses and a better quality of life in other cities.

For example, from an investment perspective, if you head further north to Manchester, Sheffield, or even Leeds, you can buy a property from £56,250. With rents at £550 – £800 pcm on a single let, that means your overall yield could be 7% and above. And if you find the right area and multi-let the property, or buy multiple units – just imagine what you could earn!

When you turn north, you tend to get 3 times the amount that some of the most known central areas in London currently generate. For example if you look at Totallymoney’s (The credit comparison company) recent ‘heatmap’ of the potential yield from rental properties across the UK you will notice that Mayfair only generates a 2.02% rental yield compared to a 9% rental yield in other northern cities. Even an area as popular as South Kensington, not far from Harrods, only produces a rental yield as low as 1.56%.

London will always be a sizzling focus in terms of property, but it’s seeing its light wane while other cities start to outshine it. So why not save money, get on the property ladder, secure a monthly income, and see a better return?

Quick Recap:

London Yields:

1. South Kensington at 1.56%
2. Mayfair 2.02%
3. Soho 2.02%
4. Chelsea 2.09%

Yields Achievable Outside London:

1. Sheffield 7% or over
2. Leeds 7% or over
3. Manchester 7% or over
4. Liverpool 7% or over

This Article was written by Harri Laitalainen, a property investment fanatic, marketing professional, and chocolate addict.

Note: The views expressed are the author’s own and do not reflect in any way, the views of Aspen Woolf. Readers are advised to carry out their own due diligence before taking any decision.

Why Invest In Studios?

Posted on 30th March 201518th February 2017 by Aspen Woolf UK

Studio Apartments Today

Studios have been on the rise in recent times. You see them in every key city. But why? Why would someone want to live in a studio, and what makes it so appealing to investors? Let’s start by answering a few key questions first.

A studio tenant usually belongs to the growing working class. They want affordable, modern, stylish, and manageable houses, something that developers have been very quick to cater to. Over the past few years, studio apartments have been cropping up in metro cities all over the UK. The number of new houses currently being built in England jumped 31% in just 12 months according to statistics released by the Department for Communities and Local Government. However, despite the growth in both completions and starts, new housing construction remains far below pre-recessions peaks.

Quick Recap: How do Landlords Gain From Property?

There are two main ways landlords make money through property letting; capital growth and rental income growth. Let’s take a quick look at these.

Why Invest in Studios-01

Capital Growth

When a property increases in value over time, it is known as ‘capital growth’. Capital growth, also known as capital appreciation, has been strong in recent times. But as we all know the value of property can go up as well as down at any time, and it is something that no one can predict. And of course the local conditions surrounding your property have a big effect.

Rental Income

Rental income, or ‘rental yield’, is another very important factor. It’s what the tenant pays you to live and use your property, and hopefully this will grow over time too. It is also hard to predict rental income, but it is usually a more reliant variable as even if a property value decreases due to economic conditions, usually rental incomes stay relatively the same. As a consequence of the recession, the private rented sector grew strongly, primarily at the cost of home ownership. Rental prices tend to follow an annual increase of inflation as well, so year on year prices tend to rise.

Why are Studios so Great?

Most property developers include a certain number of studio apartments in their projects because these are usually the first to be bought and, therefore, generate instant working capital for them.

Why Invest in Studios-02

Owning A Low Cost Asset

We asked one of our recent property investors, Ellie Woods, about why they decided to buy a studio. Ellie bought a studio recently to live in herself in order to help save up for something bigger in the future. Ellie said “The main advantage is that my monthly outgo for the studio apartment will remain the same since the EMI (Equated Monthly Instalment) will be equal to the rent that I am currently paying anyway. Besides, I will own an asset whose price will rise in the future. Property is an investment and I don’t see my Studio depreciating anytime soon”.

Also known as bachelor apartments or efficiency apartments, studio flats are small and self-contained units, with sizes ranging from 400-500 sq ft. This is why they are the most affordable options in a building project.

Should you buy a studio apartment?

This depends on your need. Studios are best for singletons, students, or couples that are looking to buy for themselves or family members.

Why Invest in Studios-02

Starting Out, Students, and Young Workers

“Most people who have just started their first job out of university or those young couples that have recently got married can’t afford to buy big apartments, especially in metro cities, where housing is expensive even if you rent it,” says Darren Hughes the Sales Manager at Aspen Woolf. He adds “Plus, people’s perceptions and needs have changed. Utilities and commuting have become more expensive. People now want modern flats that they don’t have to keep fixing, that are more economical and environmental, near to city centres and the lifestyle those city centres bring.”

For such people, a studio apartment is a good option, particularly if they spend most of their time at work. It’s even better if they can buy one near their workplace as it will help them save on transportation cost. “Usually, young people want to stay in an affordable place and sell it when they move to a different city for work.”

These properties also work for parents whose children are pursuing higher education degrees in Universities and may otherwise have to stay in a shared house, hostel, dorm, or somewhere far from their studies.

So as a quick recap, studios are great for anyone starting out in property investment, for students, and for young workers.

Why Invest in Studios-03

Lower Price and No Stamp Duty

Besides the low price, another obvious advantage is that the stamp duty for such houses is less, or in most cases completely free! For instance, if you buy a flat worth £125,000 in Liverpool, the stamp duty will be absolutely free. However, if you buy one that costs anything above £125,000 and up to £250,000, the stamp duty will be 1%. This equates to a minimum of £1250 to a maximum of £2500 in stamp duty charges alone. It can go even higher if you decide to buy a property over £250,000, in which case the charge goes up to 3%. Thus if you buy a property for £300,000, a very low price for a studio to a 1 bed in London, you would look at stamp duty of £9000. You can check how much you need to pay as stamp duty by using the various calculators on real estate portals, such as stampdutycalculator.org or hmrc.gov.uk.

Is it worth an investment?

A studio apartment can be a good investment if you are a newbie or conservative investor wary of putting your money in equity or mutual funds. Most people consider real estate a safe investment option, so buying a studio apartment, for which you need to pay a home loan EMI of around £400; can be an extremely feasible choice. Or better yet if you can buy one outright, then you can enjoy the higher than average rental yields that studios generally generate. If you do your research you can easily have the rent covering the mortgage costs if you do end up getting a mortgage and get a little bonus on top of that as well. If you buy a studio from a development that is fully managed then you are left with almost no hassle at all except for service charges and ground rent.

Why Invest in Studios-05

Selling Up

Even if you move to a bigger house later on, a studio guarantees a rental income. Alternatively, you could sell the flat and use the sale proceeds to make a down payment for a second house. These flats are easy to sell as the demand for smaller apartments is always higher than those for larger ones. This is especially true in England where there are growing student numbers and a growing younger population.

Better Investment Offerings

Studio apartments are an attractive option for real estate investors because of the high capital appreciation and good rental yields they offer. “Studio apartments in business centres and major city centres, such as Liverpool, Manchester, Sheffield and parts of Scotland, are in big demand. Prices have witnessed a capital appreciation of 10-17% a year in the past 3 years, with certain areas and cities much higher” he adds.

Why Invest in Studios-06

Location

While buying a studio apartment, the most important aspect to consider is of course location. Location is always important in any property investment, but more so for studio properties. If you are looking for a buy-to-let for young professionals then you should buy be near a workplace hub and/or city centre as this will guarantee a steady stream of tenants or future buyers. If you want to buy for your own children going into university studies or as a commercial student buy-to-let investment then make sure that the studio is located within prime educational hubs and/or an easy reach to Universities. Studio apartments around these areas are in prime demand, especially if professionally managed.

Another good option that many people don’t think about is if it’s close to a major medical hub or hospital. Families of most people who have to undergo long treatments prefer to live in a studio apartment rather than shell out money for expensive hotel rooms.

Try and opt for a project in an area which has good connectivity and where new industries are being set up. Find out if any major government projects are coming up as this will enhance the resale value of your house.

Modern Alternative Options

Many people have also turned to Airbnb as an additional revenue source, especially in more touristy areas of cities. You can easily get a greater amount of revenue with the help of Airbnb reservations, but the downside of that is of course the fact that the studio might not be occupied 100% of the time.

Attractive Yields and Capital Gains

Andrew Donnelly, CEO of property marketing firm Whiterock Capital Partners, says studios can command rental yields of 1% to 1.5% higher than one-bedroom and two-bedroom apartments.

“That means from an investment perspective, studios are affordable to buy, but the yields are much better than bigger properties,” he says.

“Studios offer yields closer to 6%, whereas a one-bedroom apartment will provide a yield of 5% and a two-bedroom a yield of 4.5%. And when it comes to renting out studios, there’s a queue halfway down the street with people wanting to rent these properties.”

However, he says investors after quick capital gains should steer clear of studios. “It depends on why they’re investing,” McDonnell says. “If it’s for short-term capital gains, I wouldn’t advise them to buy a studio as capital growth isn’t as strong in the short term as it is for bigger apartments.

“But if you’re looking for strong rental return and an investment you don’t have to think about, then go for a studio.”

Why Invest in Studios-06

I keep hearing something about a Furniture Pack?

If you plan to sell the apartment after a few years, it might be worth buying an unfurnished one. Though developers offer fully furnished studio apartments, most of the time you won’t actually know the cost of each piece of furniture or electrical item. So, it makes more sense to choose and pay for your own fittings and furnishing. Fittings are almost always set as developments get them cheaper by buying them in bulk, but a furniture pack is usually more flexible. However if you want to buy your own furniture keep in mind most developments cannot then guarantee yields if you choose to furnish the studio yourself. It is something each investor has to weigh up. If you are more geared towards an assured rental yield, then it’s best to pay a small fee for a furniture pack.

On the other hand if you are a seasoned investor and already know what yields you can generate from a studio within a certain area, then you could potentially save a bit of money by opting out of the furniture pack. Or if you are buying it for yourself or your own children, then why not furnish it with the furniture you want!

In Conclusion

Studio apartments are low-maintenance, affordable and concentrated in the trendiest parts of town. No wonder studio apartments are proving hard to resist for buyers and tenants alike.

For investors, studios are a more affordable and safer option than bigger properties and can provide a higher rental return.

In the last few decades, studios have become increasingly popular, particularly among the young and city dwellers, and there’s often little alternative if you wish to live in a city centre. It might just be the step you’ve been looking to get onto the increasingly competitive property ladder.

Advantages

The advantages include the following:

Increased security (provided it isn’t a basement or ground floor apartment)
Lower property taxes than detached homes
A range of sports and leisure facilities may be provided
Community living with lots of social contacts and the companionship of close neighbours
Communal serviced gardens, lawn and pool maintenance if available
Fewer responsibilities than with a house
Ease and low-cost of maintenance
Lower running costs than a house
The ability to live in a location where owning a house would be expensive, e.g. a city centre
Higher rental yields
An easier step onto the property ladder
Usually has no Stamp Duty, dependant on price
Smart use of space

If you learned something new from this this article and want to take the next step, then why not quickly check out our 5 Ways To Spot An Up-And-Coming Area before you take your final plunge into property!

This Article was written by Harri Laitalainen, a property investment fanatic, marketing professional, and lover of Boston Terriers.

Note: The views expressed are the author’s own and do not reflect in any way, the views of Aspen Woolf. Readers are advised to carry out their own due diligence before taking any decision.

Build Wealth & Invest in Real Estate

Posted on 10th February 201516th February 2017 by Aspen Woolf UK

In a traditional rental property situation, an investor buys a property and rents it out to tenants. The property might be a single family home, a student accommodation, a condominium apartment, or a multi-family residential property. In exchange for the right to occupy the property, the tenant pays the investor or the landlord a pre-determined amount of rent, typically on a monthly basis, for the duration of the rental period.

If done properly, the beauty of this arrangement is that the investor builds wealth from not just one, but from three distinct pillars.

Cash Flow

Cash flow is usually calculated by adding the rental income from all sources followed by subtracting the expenses and mortgage payments. If there is money left over at the end of the month after all expenses and mortgage payments have been made, the investor is in a positive cash flow situation. When the property isn’t producing enough income to cover all of the expenses including mortgage payments, the investor is in a negative cash flow position. Needless to say, investors aim to buy positive cash flowing properties or properties where cash flow can be increased in the near term. The benefits of owning a property with positive cash flow is that the investor can spend the money any way he or she chooses. That said, I know many investors who re-invest the extra money back into their properties by topping up their reserve funds or by performing renovations that increase the value of the property. It’s also important to know that when a market or home prices experience a downturn, the investment is buffered by the cash flow that is still coming in.

Principal Recapture

If you own a personal residence, you probably know that your mortgage payments include a principal portion and an interest portion. The principal portion is the amount of money that was borrowed and is still owed to the lender. One benefit of being a real estate investor is that the rental income collected from the tenant is used to pay down the mortgage, including the principal, month after month and year after year. That’s right, you own the property and someone else pays the mortgage! This is why it’s important to build relationships with tenants and treat them like clients!

Appreciation

There are two types of appreciation in real estate investing world. The first is called market appreciation and it occurs when a property increases in value over a period of time based on market forces. Of course, there are times when property values decrease or depreciates and investors need to be aware that it happens. That said, 2014 saw UK Real Estate investment volumes hit record highs of £65bn.

The second type is called forced appreciation and it happens when improvements have been made to the property. For example, updating a 1970’s era kitchen to today’s kitchen styles will help increase the overall value of the property.

These pillars are the three ways investors can win and build wealth with real estate. There are many investment opportunities out there, but these three pillars are why people invest in real estate.

Originally written by Tony Miller, a real estate agent in Ottawa, and modified for Aspen Woolf on 10/02/2015.

London Commercial Property

Posted on 26th December 20144th November 2015 by Aspen Woolf UK

London commercial property market expected to see strongest rental growth in 2015

London’s commercial property market experienced the strongest rental growth in 2014 and is expected it to stay in the lead over the next 12 months, according to a new outlook report.

The recovery in the UK economy combined with low levels of development means that the balance between demand and supply is now swinging in favor of landlords, the report from Schroders also says.

Risks to the positive outlook include the possibility that UK economic growth is much weaker than forecast, so that the upswing in rents stalls rather than accelerates.

‘While rental growth outside London is patchier, some regional markets are definitely coming out of hibernation. Given a reasonably high yield and a further rental growth as the economy improves, we expect that next year will see another solid performance from UK commercial real estate,’ said the firm’s head of real estate Duncan Owen.

The report says that 2014 has been a good year for UK commercial real estate and unleveraged total returns are likely to be close to 20%. Most of this year’s performance has been driven by a favorable fall in property yields, as investors seek income.

‘Looking ahead to 2015 we expect that total returns will remain in double figures, but that rental growth will make a larger contribution. The recovery in the economy combined with low levels of development means that the balance between demand and supply is now swinging in favor of landlords and we anticipate that rental growth will accelerate,’ explained Owen.

In the office sector, the emergence of central London as a powerhouse for international accountancy, law, media and technology companies has pushed vacancy rates back down to pre-crisis levels, not just in the prime locations of the City and West End, but also in less established areas such as Farringdon, Kings Cross and the South Bank, the outlook explains.

‘In previous cycles this squeeze on space and upswing in rents would have triggered a big increase in development and encouraged companies to move to cheaper offices in outer London, or other cities. However, so far we have seen relatively little new office building in central London, partly because stricter capital adequacy rules mean that banks are now less willing to fund projects and partly because competing residential schemes are often more profitable,’ Owen pointed out.

‘Moreover, central London now has such a deep pool of highly qualified labor that some companies are even re-locating to the centre from outer London or the wider South East, even though rents and business rates are more expensive,’ he added.

Similarly, the report says that retail rents in many parts of London are rising on the back of strong population growth. There are also an increasing numbers of young professionals who choose to live in inner London rather than copy their parents and move to the suburbs. This is leading to the rapid gentrification of areas such as Brixton, Hackney and New Cross which were previously relatively poor.

While rental growth outside London is patchier, some regional markets are definitely coming out of hibernation, the report also says. For example, in Manchester the office sector stands out as the strongest of the big regional cities, thanks to the success of its professional services. ‘In addition, we are also seeing good demand for office space in Bristol and Edinburgh and certain smaller markets such as Aberdeen, Brighton, Cambridge and Reading with strong local economies,’ said Owen.

In the industrial market, rents are now rising by 2% across the South East and Midlands and the report says that part of this is due to a cyclical upturn in demand from traditional occupiers such as builders’ merchants, but part is also due to the rapid growth in parcels, driven by online retail.

‘However, we remain skeptical about the prospects for a widespread recovery in retail rents outside London. Although total retail sales are now increasing quite quickly, most of the growth is online and the latest wave of bank branch closures as people convert to mobile banking is a reminder of the structural challenges facing retail property,’ Owen pointed out.

‘In general, the only parts of the sector we favor are convenience stores, which are benefiting from the switch to small basket shopping and retail warehouses, which provide retailers with efficient and affordable space,’ he added.

As far as the investment market is concerned, the firm thinks that the current level of the Investment Property Databank (IPD) All Property Index initial yield at 5.5% at the end of October 2014, represents fair value relative to other assets.

The report identifies three main risks around this outlook. The first is that UK economic growth is much weaker than forecast, so that the upswing in rents stalls rather than accelerates. The second is that over exuberant investors buying in the market push down the All Property yield to under 5% by the end of 2015 and the third is the uncertainty which would be generated if the next Government decides to hold a referendum on European Union membership in 2017.

‘That could be quite damaging, particularly for London. Approximately half of central London offices are owned by foreign investors and the flip side of London’s highly qualified, cosmopolitan workforce is that it is quite mobile and could leave relatively easily,’ said Owen.

‘Overall, and given a reasonably high yield and a further rental growth as the economy improves, we expect that next year will see another solid performance from UK commercial real estate. The latest Investment Property Forum (IPF) Consensus Forecast suggests total returns of between 10 and 12 in 2015,’ he concluded.

written by www.propertywire.com

UK Buy-To-Let Sector Confident

Posted on 16th December 201418th February 2017 by Aspen Woolf UK

Confidence in the UK buy-To-Let market will encourage significant investment in the sector by UK property investors in 2015, according to new research.

This is despite the fact that 52% of buy to let property investors believe interest rates will rise next year, the report from specialist buy to let business Platinum Property Partners also shows.

While the majority expect an increase, overall 42% believe interest rates will rise by less than 2% and only 10% expect to see interest rates rise by 2% or more. However, 29% cited a rise in interest rates as their biggest concern for 2015.

An interest rate rise of any size would make buy to let borrowing more expensive, this hasn’t slowed down landlords’ ambitions as 43% of existing landlords intend to grow their portfolio of rental properties next year.

Some 23% intend to expand their portfolio by one and 14% say they will purchase two more rental properties in the next 12 months.

Landlords owning Houses in Multiple Occupation (HMOs) for young professionals and key workers have some of the biggest ambitions for 2015 with 52% planning to add to their portfolio during 2015, 29% planning to add two properties and 14% will add three.

The survey also found that landlords still feel confident about capital growth despite recent reports that the housing market is slowing. While the Council of Mortgage Lenders (CML) point to a dip in mortgage lending as evidence that there has been a ‘plateau’ in housing market activity, landlords are confident that house price growth will continue during the course of the next five years.

Just under half, 49%, expect UK property values to climb by up to 10% over this period, while a further 28% of investors predict an increase of 10% or more.

HMO landlords have an even more positive outlook for capital growth with 43% saying property prices will increase by 10% or more, some 15% more than the overall average. None of the HMO landlords surveyed expect house prices to decrease in the next five years.

However, UK buy-To-Let investors have some concerns about what 2015 may bring. When asked for their number one concern, an increase in interest rates topped the poll at 29%, closely followed by future changes in laws and legislations for landlords at 26%. A further 9% are most concerned about the impact of a change of government ahead of the general election and 20% have absolutely no current concerns.

‘A rise in interest rates is one of landlords’ main concerns for 2015, yet the majority don’t anticipate that these rises will be dramatic or unaffordable. As a result, our research reveals that the sector will continue to grow next year, with two in five planning to add to their portfolio despite a likely interest rate rise,’ said Steve Bolton, PPP chairman.

‘Investors in HMOs show the greatest intention to increase their portfolios, which reflects the fact that HMOs and renting to working tenants such as young professionals delivers extremely attractive returns, and offers higher rental income compared to other buy to let options if done properly. This has cultivated robust confidence among those already reaping the fruits of this type of investment, and has sown the seeds for ambitious expansion in the sector next year,’ he pointed out.

He believes this is great news for the long term health and prosperity of the sector, as thousands of ambitious young professionals at the beating heart of economy depend on the flexibility of rental accommodation to follow the best job opportunities. However, they also require more choice of high quality yet affordable homes to help them save for a deposit should they wish to buy in the future.

‘Naturally, as an investor you can never guarantee the level of your return, and even seasoned landlords need to do their homework and seek expert advice before making another investment to maximise their profit potential,’ he added.

Written by www.propertywire.com