Is it still worth investing in buy-to-let?

Over the past 10 years, investors who purchased a buy-to-let property in southern cities such as London and Oxford have reaped the rewards of considerable house price growth during that period.

Those who got in early to the BTL market have reaped the returns. A report written in 2015 by economist Rob Thomas showed that buy-to-let returns over the previous 18 years had beaten those from every other major asset class available. Since buy-to-let mortgages were introduced in 1996, Thomas calculated that net annual returns have averaged at 16.2%, compared to a lower average return of 6.2% on UK equities.

Most of the experts point to longer-term trends that underpin the future performance of residential property investment. The UK's population is growing and quite simply there are too few homes for the existing population and that's a situation that's likely to endure for the medium to longer term.

The number of people renting continues to increase, with a third of UK’s millennials who will rent into retirement. The UK has the fifth-highest number of tenant occupiers out of all 28 EU nations. VeriSmart forecasts renters will account for 55% of the housing market by 2045.

Despite the pandemic, investing in buy-to-let is still delivering impressive capital and income rental in parts of the UK, especially the North East. Newcastle in Tyneside is one of the cheapest major cities for property in England according to Hometrack (December 2020), where the current average price is £129,800.

The North East region comprises Tyne and Wear, Teesside, County Durham and Northumberland, with a population of around 2.6 million, so there is a booming property market, driven by affordable housing and growing demand for rental properties.

Stuart Williams, (pictured) Founder and CEO of Thirlmere Deacon, comments: “Clearly the BTL market is still offering good returns for investors, provided they focus on affordable parts of the UK, where there are strong yields and the potential of good capital growth.

“Newcastle is one of the fastest-growing cities in the UK, with over 14,000 new jobs expected over the next 12 years and the city’s population is projected to reach over 310,000 by 2030 while the region’s population is projected to be 2.75 million by 2030.

“Newcastle was recently listed in PWC’s Good Growth for Cities report as one of the UK’s top 5 most improved city regions. Economists are also predicting that throughout the 2020s thousands more jobs will be created in the city. So it’s a great place to invest as demand for quality rental accommodation is high amongst students and young professionals.

“Our Newcastle Central Apartments, located in the very centre of Newcastle at one of the city’s most exciting locations, is currently in the throes of considerable regeneration. This prestigious apartment building is ideally located for those working or studying in the city, within walking distance of train stations, shopping centres, several hospitals and under 1km from both of the city’s universities.

“This development will easily be one of the finest in the city and is being completed by a developer who has an impressive track record. As with all the developments, we propose to our clients the property and the location have been carefully considered and fully vetted by our team. Originally built as an office development, it is now the subject of a visionary multi-million-pound conversion scheme that will create 152 top-quality apartments.”

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