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A View From The floor

While the buy-to-let sector continues to grow rapidly, there are signs that purchases in some areas are starting to slow, a report issued by UCB Home Loans last week reveals.

The report shows the market is still buoyant, as would be expected in a sector which is relatively young. But we are seeing signs that enthusiasm is waning a little in some areas as rising interest rates and increased house prices have a cooling effect.

Rental returns of between 4% and 8% can be achieved across the country but there is a perceptible downward pressure on yields in areas where the ratio of landlords to tenants is higher. Parts of London, the South-East and the South – including the Home Counties – will still offer reasonable returns on carefully planned new purchases but higher yields can generally be expected in more northern areas where house prices are lower.

With the market gradually beginning to soften in some areas, it is more important than ever that investors take a long-term approach when considering making purchases of buy-to-let properties.

Potential purchasers must undertake thorough research before making a decision and take at least a ten-year outlook rather than expecting to make a quick gain through capital appreciation.

Links to areas of increasing employment, growth in student populations in university towns and prospects for transport development are three of the most important factors that must be looked at, and buyers should always take advice from local letting agents regarding the types of properties that might be suitable for the rental market as this varies by area.

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