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Wales buy-to-let boom boosting incomes for investors… and students

The ‘buy-to-let’ investment market is showing no signs of cooling at present, reports Jackie Llewellyn of letting specialists Red Key Property. And the winners are… everyone from institutional investors through to students.

The recent figures showing that loans to landlords – or “buy to let mortgages” – have reached a five-year high came as no surprise to those of us working at the letting “coal face”.

More and more people are recognising that this is an investment that returns far more “bang for its buck” than conventional bank and savings accounts… and there’s also a real prospect of property prices steadily heading upwards, giving solid capital growth in the years to come.

The Bank of England’s pledge to keep interest rates low has really helped, and prospective landlords know that lending is getting easier as well as cheaper. Some £5.1bn was lent to landlords in the last quarter – up over a fifth on the previous three months.

This availability of money, added to the continuing problems that many people find in actually buying their own home, has led to very brisk demand for buy-to-let properties, and it’s been fascinating to see the range of investors now coming forward.

My side of the business tends to focus on “corporate buyers” – building societies and other financial institutions picking up blocks of apartments or even whole housing developments… sometimes before they’ve even been built. And certainly South Wales is proving a happy hunting ground as we have had a spate of good quality developments of all sizes in the last couple of years.

The benefits to developers are enormous: often we’ve been able to negotiate a deal on a prospective development at the planning stage: the developer knows precisely what they’re going to receive at the end of the project, without the need to market or the prospect of properties remaining unsold. They can even phase the project, helping their cash flows.

Larger investors are always keen to have a balanced portfolio and property (commercial and residential) has usually been part of that. With managed portfolios returning typically 5 or 6 per cent net, plus capital growth, the attractions are obvious.

Equally, we are seeing many high net-worth individuals coming into the market, snapping up half a dozen properties at a time and putting them into trusts for their families’ futures: a very tax efficient way of keeping wealth in a family.

But another very interesting investor has also emerged in recent years: individuals buying a house on behalf of their children in order to provide an income through university. Put a £50,000 deposit down on a £200,000 apartment or house and that will typically generate £1,000 a month income.

At the end of the three or four years, the property can be sold to pay back the mortgage, recoup the original investment – and possibly more besides.

Buy a property that’s a student share, and that’s their rent sorted out and the student can keep a weather eye on the family investment… who said property was boring?

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