Interest rates uncertainty takes shine off residential investment market, but owners urged to 'be flexible'...
Residential apartments in Birmingham city centre have long been a popular choice for buy to let investors. Fed up with poor performing equities and low returns from deposit accounts and pensions, many private investors have turned their attention to the residential market and have put their investment money into a portfolio of rental properties.
Recent reports on the slowing housing market, rising interest rates and lower rents may however be taking some of the shine off the residential investment market and landlords are naturally concerned about yields. But according to leading residential lettings agents in Birmingham, Bruton Knowles (BK), now is the time for landlords to sit tight on their investments, be flexible in their approach and think outside the box to maximise returns from their property portfolios.
Debbie Hyland who heads up BKs residential lettings team, said: Market evidence points to continuing demand for quality rental apartments in the city centre and interestingly we are also seeing a shift in demand for properties beyond the city core and into the suburbs.
There are a number of new residential schemes coming on line in up-and-coming areas such as Erdington, Moseley and Sutton Coldfield. Developer George Wimpey is currently marketing The Mall in Erdington and this is proving very popular with purchasers as a buying-to-let investment. Just ten minutes away from the city centre and on the M6 bus routes, the scheme boasts a mix of town house and apartment accommodation and rents can start from £500 per month for a one-bedroom apartment and from £600 per month for a two-bedroom apartment.
We believe the suburbs will provide good investment opportunities as tenants - particularly with young families - demand space, gardens and good schools nearby. Areas like Erdington will appeal more and more and the proliferation of new builds in these areas underline this trend. We are certainly finding more and more properties from outside the city centre are coming onto our books and take-up is good.
Indeed, there has always been a good level of demand for family-type accommodation in areas beyond the city core such as Edgbaston. For those seeking larger living areas and open spaces, a six-bedroom property on our books will be rented out for £2,000 per calendar month.
Our advice to landlords in this market is to be realistic about rental levels. Although yields are levelling and a return to the heady yields of six per cent mark achieved in the London and Birmingham markets are unlikely in the foreseeable future, landlords have to recognise that the capital appreciation on their property adds to the value of the asset. Landlords should not lose sight of the fact that they are in the market for the long term and like equities and other forms of investments, there are likely to be highs and lows. Returns from investments can go down as well as up and often follow a cyclical pattern.
Debbie Hyland points to strategies for landlords which will help them maximise rental income in a slower market: Be realistic about the rent you can achieve in this market and dont price yourself out of the picture. By benchmarking the market, we can advise clients on the optimum rent they can expect to realise on each residential property. The key for landlords is to maintain a constant level of rental income - we would advise landlords to offer incentives and possibly agree a reduced rent for a set period to avoid quality tenants from moving on.
The Birmingham city centre market in particular is experiencing a high churn rate whereby tenants move from new accommodation to new accommodation very quickly just for the novelty factor of experiencing living in a brand new apartment. Refurbishment and redecoration of rental properties is a good option to encourage tenants to stay put and this avoids problems with properties lying empty whilst new tenants are being signed up. The key to a successful tenant relationship is good customer service; regular consultation and dialogue with tenants will minimise costly voids, added Debbie.
For further details on residential lettings in Birmingham, contact the BK lettings team on 0845 200 2580.
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