October 10, 2014//
The UK has always had a love affair with housing, and buy to let has been one of the financial success stories of the past 20 years.
But some are questioning now whether the economics of buying and renting out property in some parts of the UK actually makes financial sense for investors, given the rapid house price rises in certain areas, and in particular, in the capital.
The most recent figures still show robust demand: according to the Council of Mortgage Lenders (CML), buy-to-let lending hit £2.4bn in July 2014, which was a 26 per cent rise over the same period last year.
Part of the reason may be that investors are being driven to look to property as an alternative to cash, where interest rates are very low, and as an alternative to equities, which after a good performance in 2013 are showing signs of volatility and uncertainty.
Yet although house prices in the UK had seemed as though they were on an upward trend, new data suggests that growth may be slowing, or even reversing. Predictions are for house prices to fall by 0.8 per cent this year, according to the Centre for Economics and Business Research (CEBR.
This, coupled with the prospect of higher interest rates in 2015, might persuade investors to pause for thought. The UK buy to let market has always held appeal because it promises both income yields and the prospect of capital growth. But without the latter, the investment starts to look less attractive.
With yields on rental properties at an average 4 to 6 per cent, the lack of capital growth starts to be of concern. As a consequence, some investors have been looking further afield for the next opportunities in property – and the US is one of their target markets. Recent indicators of the US economy have been positive: GDP rose at higher than expected annualised rate of 4 per cent in the second quarter of 2014. Consumer spending, which accounts for 70 per cent of the economy, rose at 2.5 per cent, exceeding the 1.9 per cent median forecast of economists surveyed by Bloomberg.
Companies added 218,000 workers to payrolls in July, exceeding the average for the year, and the country now has the lowest unemployment rate since 2008. What’s more, investing in US Property can generate reliable income and yields of 10 per cent or more if you choose the right type of property in the right area, says US property specialist CityR.
Investment schemes, such as the ones run by CityR, are becoming increasingly popular with UK investors looking for better returns on their investment.
CityR invests up to 10 per cent of the capital required for the investment, with the rest becoming investment opportunities for partners. The minimum starting investment is £24,000 and there are quarterly income payments to partners from day one.
CityR’s newest venture is at 316 west 34th unique opportunity for investors because Chicago, with a population of 10 million, is the largest metropolis in the US and is a major employment centre. The area is also a major 15th global financial centre, and Chicago is home to the largest futures exchange in the world, the CME Group. Street, Steger, IL. CityR believes it represents a
In addition, the Chicago metropolitan area hosts the corporate headquarters of 57 Fortune 1,000 companies. CityR founder Ron Szekely says that when looking for new investment sites, it is important to identify areas where there are a multitude of different employers and industries, in order to ensure that the rental units are not dependent on families working for just a handful of companies.
The Chicago property currently has 75 per cent financing in place, consists of 672 units, has 98 per cent occupancy and offers a 10 per cent assured annual return. The US has a robust legal and financial framework that the US offers – unlike some European countries – and the opportunity for capital growth.
“The recent economic crisis in the US means that property prices still offer good value, with the potential for capital gain over an investment horizon of 3-5 years,” says Ron Szekely.