A report by the Centre of Economics and Business Research (CEBR) has concluded that buy-to-let investments still have considerable potential. The report made predictions about the state of the buy-to-let market during the next 10 years.
According to the report, mentioned in a June 2017 FT.com article, average rental yields were 5% in 2016 and are predicted to drop to 3.5% by 2027. The report forecasts that the average price for residential property will rise to £336,845 in 10 years’ time – an increase of 59.7% compared to 2016 prices. This capital growth should make up for lower rental yields.
The CEBR believes that demand for private rented property will remain strong. The proportion of people living in private rented accommodation was 21% in 2016, and this is expected to rise to 28% by 2027.
The CEBR is concerned that the rise in house prices in London will not be sustainable. There is currently a large demand from immigrants for rented property in the capital, which may be lowered depending on the outcome of the Brexit negotiations.
The report predicts that there could be fewer individual small landlords with one or two houses, and a probable increase in commercial companies holding large property portfolios.
Commercial mortgages are available to finance buy-to-let property, and with rates low at the moment, now may be a good time to get involved. As long as a landlord has a sound business plan, the CEBR report demonstrates that it is possible to make good profits through buy-to-let investments.