Dundee to Regain its Buy-to-Let Crown?

Two stories attracted my attention recently – the first being that buy-to-let lending has increased by more than 10% in 2012. This was a report from CML advising that in 2011 and 2012 there has been an expansion in buy to let lending with a 10% increase last year.  The second story was a report by specialist lender Paragon Mortgages advising that Landlords achieved an average yield of more than 6% in 2012.  John Heron, Director of Mortgages said “yields are a critical measure for Landlords and would-be Landlords in assessing the relative value of an investment in property.  With returns on cash falling in recent months and continuing high demand for rented property it is not surprising that we are seeing an increase in activity from both new and existing Landlords.”

A number of years ago one of the Sunday newspapers called Dundee the buy to let capital of western Europe.  I am certainly noticing an increase in activity from buy to let investors and although I had anticipated this increase happening earlier, I am now receiving a number of enquiries in relation to property investment.  This demand is across the whole spectrum from large property funds to individuals who are looking to buy one or two properties either to supplement income or as a long-term investment.

Why is Dundee so appealing:-

1.  I think high tenant demand is caused by three things: –

  • 1a. A local population that is willing to rent.
  • 1b. A strong and ever-growing student population.
  • 1c. A lack of funding for first time buyers.

2.  Good low entry prices – compared to certain areas in Scotland Dundee’s average house price is lower making it easier for people to get on the buy-to-let investment ladder but also indicating that there is good potential for capital appreciation.

3.  Good yields – while this is property type and area dependent i.e. a flat in Broughty Ferry could yield 4% to 5% – there are some deals going through at 12% to 15%.

4.  The opening of the VMA in 2015 – this will have a big impact on local economy and the housing market.  There are also a lot of capital investment projects and Dundee is certainly a City that is going places.

I think the future is very bright for property investment especially in Dundee and 2013 is the year that this is really going to begin.  I will keep you advised of trends.

 

Lindsay Darroch
Partner – Head of Property 

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