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Tips for Buy-to-Let Investors During Low House Prices in the UK


May 23, 2024 ( Newswire) The property market has often been the most reliable form of investment. During financial turmoil, the property market stands firm.

However, inflation rates and the Bank of England interest rates have affected the UK housing market throughout 2022 and 2023.

Now, Zoopla and RWinvest are saying UK property sales may fall to the lowest rate in a decade.

What does this mean for buy-to-let investors? And what can you do to benefit during times of low prices and activity?

Read more on for more information.

What Does Zoopla Predict About the Housing Market?

Zoopla's August House Price Index shows house and flat sales are set to fall to the lowest number in a decade.

The index tracks homes sold. However, property sales are down by a fifth compared to 2022.

By the end of the year, Zoopla predicts sales will be the lowest since 2012.

However, the property portal still expects one million sales in 2023.

In addition, the Nationwide Building Society noted prices had experienced the most severe drop in 14 years.

This would have appealed to buy-to-let investors at one time. However, the increased cost of borrowing has negated any potential benefits.

Mortgage rates are still much higher than usual. Rightmove puts the average mortgage interest rate for a five-year fixed 85% loan-to-value mortgage at 5.73%.

The Bank of England base rate also stands at 5.25%.

Because of this, Zoopla expects mortgage sales to decline by 28%. However, cash sales should only fall by 1%.

That being said, lenders are reducing mortgage rates again. This is a glimmer of hope for the UK housing market.

Tips for Buy-to-Let Investors When Prices Are Low

While the market is still in a slump, investors may consider the following strategies to protect their investments or even grow capital.

Purchase Property at a Low Price

If you are a first-time buyer, 2023 is an opportune time to get into the buy-to-let market. The chances are that property won't be this cheap for long. Finding bargains is difficult when house prices regain their lustre.

While mortgage interest rates are impacting the upside of low property prices from £100K, cash buyers are in a prime position to pick up a bargain.

Once the market recovers - and it will - you can sell for a healthy profit.

Ensure Properties Are Tenanted

While property prices are dropping, rental demand is at an attractive high. The Homelet Rental Index & the RCCIL puts UK annual rental growth at 10.30%. Mortgage rates have seen rental prices increase. However, tenanted properties will ensure you do not feel the pinch during a void period - the time when no tenant occupies your property.

Consider Off-Plan Property Investment

One of the best ways to take advantage of low house prices is to consider off-plan property investment.

This strategy involves purchasing a property from the developer before or during the construction period. Investors will benefit from significant discounts on the property's value. In addition, the price will rise during construction, so you could choose to sell with a short-term strategy.

Off-plan properties have many other benefits. For instance, they will comply with the Government's new EPC requirements. They often have modern facilities. Off-plan properties are also strategically placed in rental hotspots that are predicted to see significant growth in the near future.

Final Thoughts

As you can see, there are multiple ways investors can stay ahead of the curve during times of low house prices. While the headlines may read like doom and gloom, the right investment strategy can weather the storm and even lead to a healthy profit.

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