What will the Base Rate cut do for Investor Landlords and the Rental Market in Surrey?
The Bank of England’s Base Rate cut effective August 2016 from 0.5% down to 0.25% is great news for those on tracker mortgages and those obtaining a mortgage, but the rate cut is unwelcome news for holders of cash and those dependent on savings.
It could be argued that the only place to put your money is in property as the lack of rental properties to the high demand has continually been responsible for rising rates still offering a good return on invesment by comparison to what the banks and building societies will offer you.
The reduction in base rate should translate into lower mortgage rates, as it becomes cheaper for banks to access funding for their home loans. As a result, financing an investment purchase should be cheaper. In turn, this means that investing in property will become an even more attractive proposition to a wider pool of prospective investors.
In addition, the base rate cut has caused the value of the pound to loosen. This has added to the appeal of British property to international investors, as they can now get more for their money. So landlords looking to take advantage of cheaper funding in order to add to their portfolios may find they face increased competition from overseas.
Why investing in property is still a popular option
However, irrespective of our status within the EU, the fundamentals of the property market remain strong. To put it simply, people need homes to live in and we just don’t have anywhere near enough of them. According to the House of Lords Select Committee on Economic Affairs, the UK needs to build 300,000 homes a year to meet demand and have a “moderating effect” on house prices. The reality barely taps on the door of these official targets. Industry estimates suggest we built around 170,000 homes in 2015/16.
That imbalance between supply and demand will continue to support house price rises and rental growth. As a result, it will still be hugely attractive to investors looking for a strong return on their money.
The areas of East and West Horsley, Effingham, Bookham, Fetcham and all the villages between Leatherhead and Guildford are hugely popular destinations for those in the city to relocate to. Still maintaining excellent transport links to the city, the commuter belt is getting increasing popular due to its local independent and state schools, shopping and leisure facilities. Whilst we have to be careful not to overdevelop and ruin our country villages, purchasing a property to let in these areas is a wise investment as the popularity of this villages have been on an upward trend for a decade and shows no sign of stopping.
East and West Horsley, Effingham and Bookham have a huge demand for family homes with the most popular rental bracket being between £1650 – £2995 for a 3-4 bedroom family home. There is a 3 bedroom detached home on the market for £675K situated at Effingham Junction that would rent for a minimum £1800pcm giving just over 3% ROI. Within walking distance of Effingham Junction train station and a few minutes drive to get on the A3 or M25. The property is ideally situated for feeder schools in Horsley and Effingham for the Howard of Effingham School. This would make a great investment.