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Energy efficiency has become a top priority for buy-to-let investors

When making investment decisions, many buy-to-let investors are considering green credentials of properties, alongside rental yields and opportunity for capital growth.

New research by Hodge reveals buy-to-let investors are starting to put more importance on the energy efficiency of properties. In a survey of landlords, investors and brokers, 82% of respondents said environmental friendliness and energy efficiency were a top consideration when purchasing properties.

Green credentials even made it in the top three considerations when making decisions on property investments, along with the opportunity for capital growth and rental yields. Hodge also pointed out that other recent research is indicating that people are prioritising living more sustainable lives.

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A Savills report revealed 26% of people consider the environment the most important issue facing the country. Additionally, research by Opinium showed 78% of the public feel they have a personal responsibility to deal with the climate crisis. Many of the people included in this research will be renters, showing the need for more eco-friendly properties.

Property priorities are changing

To stay competitive, buy-to-let investors need to adapt to these tenant preferences and the changing market. Investors, along with property developers, will need to provide more choice in sustainable housing options moving forward. And it’s positive to see investors are already prioritising green credentials.

Andy Button, head of investment finance at Hodge, says: “The buy-to-let market is particularly buoyant right now with demand continuing to grow throughout the pandemic, and it’s interesting to see how the priorities for landlords are changing when looking to add to their portfolio.

New-builds in high demand

The government has a target to reduce greenhouse gas emissions to net zero by 2050. Improving the energy efficiency of housing will play an important part in achieving this. There is even talk that the government could further increase minimum EPC ratings for properties in the private rented sector in the coming years. Currently, all privately rented properties need to achieve a grade E or higher.

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With the latest environmental standards, new-builds are greener properties. The majority of new-build properties have an A or B EPC rating. Higher green standards are even being introduced. This will further lower energy consumption and reduce bills for occupiers.

New-builds are more appealing to tenants compared to old, tired properties. The high environmental standards and lower bills provide benefits to tenants. This makes energy efficient new-builds ideal for buy-to-let investment. Because of this, good quality new-builds are becoming increasingly sought after.

Andy adds: “It’s clear that sustainability will feature more and more in new build development design, and more stringent compliance to EPC, and an investment strategy more closely aligned to sustainability could actually improve cash flows in the longer term, as tenants might be prepared to pay higher rents, in exchange for lower utility costs.

By Kaylene Isherwood

Source: Buy Association

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Liverpool named UK’s best buy-to-let area to invest in

New research has identified Liverpool as one of the best places in the UK for buy-to-let investors, with yields as high as 10.30%.

The findings are from analysis by Mojo Mortgages using the UK Land Registry, Zoopla, On The Market and property data portal, PropertyData.co.uk in a bid to find where the current investment hotspots are.

Mojo said: “From our analysis, the North West is one of the top regions for strong buy-to-let yields. As well as a number of profitable areas in Liverpool, the area of M14 in Manchester, which covers Fallowfield, has a yield of 7.60%.

“Both these cities have a solid student population, plus property prices are relatively low.”

In the UK there are an estimated 2.6 million buy-to-let landlords, and despite the pandemic, those who do have the cash to invest believe investment opportunities will emerge, with lenders cutting rates on buy-to-let products and raising affordability thresholds.

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There’s also market sentiment which is leaning towards limiting competition from other buyers and even pushing up demand for rental property.

From its analysis, Mojo found that Liverpool is currently the best place to consider.

The city’s L7 postcode tops the buy-to-let yield table, generating yields of 10.30% and an average asking price of £95,000.

The postcode covers the area of Edge Hill and is in close proximity to Liverpool city centre.

Five more Liverpool postcodes feature in the top 20 list of best places to invest, with yield returns ranging from 7.40% to 10.30%.

Birkenhead’s CH41 postcode came in at 17th in the list, with a return of 7.10% and an average asking price of £84,000.

Eight of the top 10 worst places to invest were in London or the South East, topped by Kensington and Chelsea, with an average yield of 2.1% and an average asking price of £1,612,797.

By Neil Hodgson

Source: The Business Desk