Portsmouth is a hot spot for investors, with its strong historic naval background, choice of appealing leisure and pleasure facilities and beautiful coastline drawing many new residents to the area monthly.
With that in mind, the buy-to-let market offers a great opportunity and is thriving again, having experienced a bit of a slowdown in the immediate aftermath of the credit crunch.
There are many reasons for the re-emergence of the buy-to-let market, as local property expert Kerry Applin, director of Chapplins in Havant explains:
‘With the continuing national shortage of housing stock, demand for rental property has soared. Research shows that with the size of deposit required by lenders forcing many young people to postpone buying their own home, the majority of newly-formed households are now more likely to be in the private rental sector.
‘This massive surge in demand, which shows no sign whatsoever of tailing off in the foreseeable future, has in turn driven up rental values right across the country.
‘And this against a background of lacklustre performance by most of the more traditional investment alternatives, a factor highlighted by the turmoil in world stock markets over the last couple of years. In 2011, for example, the yields from buy-to-let property (i.e. rental income as a proportion of the purchase price) averaged 5.4 per cent – the best since 2003.
‘In contrast, the FTSE All-Share Index yields 3.8 per cent, UK Government pay two per cent and the Bank rate is just 0.5 per cent!
‘As a result of all this, lenders have been returning to the market in a big way. A recent article in the national press reported that the average interest rate on a buy-to-let loan dropped from 5.31 per cent to 4.79 per cent over the last two years.
‘During the same period, the number of deals available doubled. The typical deposit required has also fallen back from 35 per cent plus to 25 per cent.
‘There are even some deals that only ask for 20 per cent.’
However, banks have tightened up their purse strings a little, to ensure buyers can afford what they wish to borrow.
‘Lenders have clearly learned some lessons.
‘So, for instance, whereas in the bad old days you could easily secure a B2L mortgage solely on the basis of the expected rental income, lenders now typically require you to be able to prove that you have an additional source of income of at least £25,000 a year.
‘Which, when you think about it, is no bad thing.
‘Finally, add in the fact that prices are currently the lowest they’ve been for years, and this is arguably the best time ever to invest in property!’