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Changes came from every direction in 2017, with new legislation, licensing schemes, changes to what constitutes a House of Multiple Occupancy, stamp duty, rules, regulations, scrapping allowances for wear and tear, and tax relief changes. Now the ban on letting agents charging tenants will also have an effect on landlords’ profits. While some are considering diversifying or selling up, there are still opportunities in the market if you know where to look.

Room for growth

It cannot be said often enough that demand will continue to grow. More people are joining Generation Rent, either temporarily as they save up for a deposit to buy a house of their own, or permanently. Some tenants like the flexibility of renting because they can move around from job to job or they find they can afford to live in a nicer area or bigger property. Investing in buy-to-lets is, therefore, still a healthy option. Obviously, research needs to be done in the best areas as far as rental yields are concerned, as well as investing where there’s high demand. The best regions for buy-to-lets are currently in northern England and parts of Scotland. Online rental portals such as Rightmove will show rents and average property prices, so that rental yields can be calculated.

Is London a capital idea?

London has seen rents fall by 0.83% last year, compared to an average growth of 1.27% across the UK as a whole. However, London should not be ruled out as an investment opportunity. Rents in the capital are still 2.5x higher than the rest of the UK on average. Demand will always remain high too, as more people will be priced out of the property market but still need to work in London. Also, many people moved to the suburbs to commute into the city. However, train fare increases may see some of them move nearer to work again. Size also matters in London. Across the UK last year, the highest rental growth was in three-bedroom homes. For landlords looking to invest in the London market, there is a lot to be said for investment in three-bed properties, as they are harder to come by. Average rents for three-bedroom London properties are 39% higher than rents for two beds.

Where else to invest

Whilst some professionals may move closer to work in London, the number of longer-distance commuters should remain steady. Growth in the East Midlands was 2.1% last year and it was 1.5% in the East and South West England. These figures suggest that young professionals are moving to areas where they pay less rent. The quality of housing would also be better than they could afford in London, for many of them. This strong demand for properties by long-distance commuters is pushing rents up, which is increasing yields. As examples, Thurrock and Peterborough have healthy yields, with growth of about 2%. By forecasting how rental trends will pan out in 2018, investors can still make healthy returns in the buy-to-let sector.

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