Property investors should be very selective about the areas they choose to buy in during 2012, warns buy to let specialist Assetz. Low returns on savings versus strong demand for rental property will continue to drive investment in the UK buy to let market, but with unemployment rising and the Eurozone crisis yet to play out, taking a punt on secondary locations could prove risky.
In popular residential areas where there is good infrastructure and a strong employment market, such as most of London and upmarket commuter hotspots around all major cities, buyer and tenant demand will continue to outstrip supply, supporting price growth. In contrast, areas that are reliant on manufacturing or the public sector, for example, which may be struggling with high levels of unemployment, will see relatively low transaction levels next year and a fall in values of five per cent or even greater.
Stuart Law, chief executive of Assetz, said: “Now is not the time to take a punt on potentially ‘up and coming’ locations, or those that are dependent on sectors which are at risk from high levels of unemployment. The deepening Eurozone crisis is far from over and it will no doubt continue to impact the property market here in the UK by limiting the amount banks are able to lend and stifling consumer confidence.
“High levels of tenant demand and the lack of first time buyer finance will continue to underpin the market next year with rent rises expected in the region of five per cent, as increasing numbers of people turn to buy to let as a way to generate a decent income from their cash. Buying in a strong location will help deliver a reliable rental income and a good supply of quality tenants, albeit alongside only modest capital growth for the time being.”
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