Should you look abroad for BTL bargains?
By Damian Clarkson 18th December
2007
The UK buy-to-let (BTL) brigade enjoyed another strong year in 2007, with the average
residential property investment achieving an impressive 21% return, according to
Paragon.
But, as we have mentioned before, the picture in the UK for 2008 is very different
with yields already vanishingly small and the threat of price falls becoming a reality.
Coupled with the limited number of new investment opportunities arising; some investors
are now looking abroad for residential BTL returns.
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Investing across the pond
Investing across the pond One such destination is the US, according to International
Homes and Loans (IHL), thanks to a favourable exchange rate and increased investment
opportunities.
IHL says the recent credit crunch has forced the US mortgage industry to tighten
its lending requirements. That in turn has meant fewer domestic citizens being eligible
for mortgages, and thus a rise in families renting instead.
“While the holiday home market is also booming due to the current situation, the
US industry is noticing a sharp increase in a new breed of UK BTL investors who
are intending to move their business model to foreign shores,” says IHL.
Of course the sub prime turmoil that has beset the US property market could well
put off many investors. So if you're looking for something a little less risky,
why not train your sights closer to home.
Contact a mortgage broker to find a better buy-to-let
mortgage deal
Follow the train tracks
The French property market has risen by 73% in the last five years and 15% in the
last year alone, according to figures from Halifax, so it has already gained a reputation
as an attractive proposition to UK investors.
And the lure of living or investing in France has been further increased by the
launch of a high speed train link earlier this year, which will shave 20 minutes
off the journey between the French coast and London.
The effect of this has been immediate - foreign exchange firm HiFX says it noted
a 17% increase in property inquiries about France in August and September. And of
course higher demand means higher potential return for investors.
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Capital gains still available
And with property prices in France 30% cheaper on average than in the UK, investors
will require less capital to gain access the market – a fact that shouldn't be understated
given mortgage lenders' reluctance to loan out large sums of money in the middle
of a credit crunch.
The downside of buying in France is fact that legal fees are extremely high, anywhere
up to 8% of the property's value, but despite this the overall cost will still be
substantially lower than in the UK.
Looking at the various regions, Paris is unsurprisingly one of the main targets
for residential investment. A recent report by a French financial newspaper forecast
that property prices in the capital would increase by 8% in 2008. So while investing
there could prove a sound move, the problem is actually finding somewhere to invest
in the first place, as Parisian property is always in short supply.
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Cast your net wider
Thankfully, the new high speed rail network has not only proved a fillip to the
capital. Lille is just 80 minutes away from St Pancras, and properties in it and
the surrounding area cost around a third less than the national average, according
to holidaylettings.co.uk.
Perhaps the main attraction of Lille is the fact is it is a major university city
with nearly 100,000 students, meaning rental properties will always be in high demand.
Better still, standard student tenancy agreements tend to run for three years, meaning
stable and guaranteed income for the BTL brigade.
Finally, there are a number of new developments being built around the town, meaning
opportunities could be easier to come by than the capital.
Contact a mortgage broker to find a better buy-to-let
mortgage deal
Article produced by EveryInvestor.co.uk
