Buy To Let Tenants


Neil Simpson is a former Personal Finance Journalist of the Year and the author of the Buy-to-Let Investor column in Financial Mail on Sunday. He is a keen property investor and writes about buy-to-let online as well as for a variety of publications including City AM.

In the boom times then “location, location, location” may well have been the only rule property investors needed to follow. But things get a lot more complicated when times are harder. As anyone with an empty city-centre property in places like Leeds can attest, then “tenants, tenants, tenants” seem to matter more.

Working out where those tenants are now, and where they will be moving in the near future, is the new holy grail of buy-to-let. And if you’re trying to get some answers then the latest research from Halifax is a great starting point. The bank has used figures from the Office of National Statistics, from its own house price research, and from local authorities across the country to work out who has been moving where over the past decade.

Key fact is that the south east has been the biggest magnet. Some 2.5 million Brits have moved there from other parts of the country between 1996 and 2006. So far, so predictable. But look beyond the headline and Halifax shows that a surprisingly large number of people quit the south east over the same period. When these people get included in the total the region shows a net gain of ‘just’ 384,000 new residents.

It seems that the lower profile south west is the real draw for Brits. It has seen the highest net gain in the country over the past decade. Not surprisingly this has been reflected in house price growth that is third only to London and Northern Ireland.

And this is where it gets a little more complicated. Yes, price figures show that London and Northern Ireland have scored highest for capital gains. But population movement figures show that they are the only two areas of the UK to record net losses over the period. Former residents are moving on and moving out faster than they can be replaced by newcomers from other regions – which shouldn’t have boded well for prices. The obvious truth is that immigration from overseas has squared the circle. London in particular has attracted a million new residents, according to Halifax. This gives it a net population gain of 538,000 – a figure many other commentators suggest could be an underestimate.

Other useful nuggets of information from the Halifax figures show that coastal areas are hugely popular with Brits on the move. Internal migration to the sea has been a huge trend and shows no sign of slowing down. Interestingly enough for buy-to-letters with flash new city centre apartments most urban areas are net losers of population. All the much-heralded glamour of city centre renewal is leeched away by the sheer numbers of people fleeing to the suburbs and beyond. No surprises for guessing that cities come top of the Halifax poll of the most transient places in the UK. They get more new arrivals, and more departures, than any other parts of the country.

So what does all this mean for property investment in 2008? As they end in 2006 the Halifax figures don’t take into account the new climate in the housing market. But it’s hard to feel that the trends will be markedly different even when they do. My worry might be that immigration has saved so many areas of the UK where Brits seem less keen on living. And if our economy dips and our pull factor falls – or if tighter controls allow fewer people to settle here – then the empty property trend might spread.

That said, Halifax has got some other useful tips for investors. Its property predictions for 2008 suggest that many areas of the south east will buck the dull trends this year. Key locations include Olympic areas including Hackney in east London, and areas on the new crossrail routes. Kent should also do well, especially on the coast with Chatham, the Medway towns and Dartford in its sights. Other big capital projects also figure in the bank’s predictions – Liverpool, for example, is seen as a good bet because of the city of culture effect. Scotland and Wales also appear in the Halifax list of ten best locations for the year. Lochgelly, Paisley, Greenock and Aberdeen are there alongside Monmouthshire, Newport and Pontypool.

Finally, here’s a recap of where the experts say the best growth came in last year. Halifax recorded the biggest average gains in Montrose and Winchester, while Nationwide saw them in Belfast, Aberdeen and London.