Does Size Matter for Property Investors
16 September 2019 7004 Views
When it comes to property investment, the old adage is ‘location, location, location’. Any property investor that has found success will understand that where your investment is based has a huge effect on the bottom line. But does the size also matter for investors?
The English Private Landlord Survey shows that couples aged 25 - 49 make up the largest proportion of private renters, a demographic that is increasingly prioritising space and flexibility.
Most investors will want to choose an emerging location that is affordable but forecasting growth, ensuring that they’re maximising returns but in the process sometimes overlooking size. As we see a huge shift in demand from the traditionally popular London market to more regional cities and towns, new trends are emerging too. As more people look to rent indefinitely, size could be the catalyst for a shift in the most popular property types on the market.
Whether you’re looking for higher rental yields or want to take advantage of a certain demographic, the property type you opt for has a huge effect. Figuring out this strategy is vital as once you know your end goals, you’ll know the property type that will work for you.
Property Types in the UK
There’s enough asset variation in the UK market to suit a broad range of strategies. Investors may use a studio or 1-bedroom apartment to target solo renters while others will opt for a 2-bedroom apartment to attract couples, affluent singles or even professional sharers. According to Homes and Property, larger apartments are more likely to attract tenants despite rents being higher, making 2-bed apartments one of the most in-demand assets in the market right now.
Looking purely at rental yields, 2-bedroom apartments are one of the most optimal property assets for a Buy-to-Let investment. Zoopla’s yield data shows that 2-bedroom apartments outperform every other property type aside from 2-bedroom houses with an average rental yield of 5.16%. This makes it incredibly appealing for investors, especially if the location is in a ‘prime destination’. Unsurprisingly, one-bedroom apartments outperform their ‘house equivalent’, though if you’re looking for more than three bedrooms, a house would be the better option.
With this in mind, forward-thinking developers are opting to include 2-bedroom apartments in their developments because they appeal to couples and professional sharers - two incredibly popular demographics. Couples typically bring double salary security and, according to Knight Frank, rent for longer, meaning fewer void periods.
Camilla Dell from Black Brick, a London-based property consultant, believes that: “Generally speaking, flats make better buy-to-let investments than houses, especially two-bedroom, two-bathroom flats which many young professionals favour and can share with a friend, partner or co-worker.”
So ‘Does Size Really Matter’? As you’d expect, yes. If you’re looking to maximise rental yields, 2-bedroom apartments are the way to go. Apartments in general either outperform or near-enough match their ‘house equivalent’, typically providing easier access to desirable city-centre amenities. As a market, the UK is also incredibly receptive to 2-bed properties as ‘Generation Rent’ looks to find space, flexibility and affordability where they can.
Of course, location still plays a role in the overall performance of the investment. In the South we’re seeing locations such as Bracknell and Slough emerge as potential markets because of their affordability and accessibility. Older stock in these areas is being outperformed by, as you’d imagine, larger and more spacious 2-bed apartments.
For example, as a market, Slough represents an established commuter town and prime investment destination that is both accessible and affordable compared to London. It’s also home to Steel House - a landmark residential development by SevenCapital that includes a number of spacious apartments ready for investors. Perfectly positioned to take advantage of the town’s thriving commercial landscape and part of Slough’s renewal plan, Steel House will meet the needs of the rapidly-increasing tenant demand sweeping through the town.
Bracknell on the other hand is the cornerstone of the UK tech sector and an emerging market filled with potential. Home to The Grand Exchange, this development will feature ultra-modern and spacious 2-bedroom, 2-bathroom loft-style apartments alongside unprecedented, exclusive resident facilities.
Designed specifically for the modern tenant and to meet the demand for space, The Grand Exchange will arrive alongside the £770 million regeneration sweeping through the town. Get ahead of the game and enquire about The Grand Exchange today.
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