WHAT DOES A 5.1% HOUSE PRICE INCREASE MEAN FOR YOU?
Last week, the Office of National Statistics (ONS) published its monthly House Price Index. This is just one of the many house price reports published on a regular basis and collates information from Land Registry, the Registers of Scotland and the Land & Property Services Northern Ireland to produce its monthly House Price Index (HPI). These reports provide a real insight into the current market and are full of useful information, generally giving an accurate representation of the entire property market along with regional breakdown figures.
But how does the information in this report benefit buy to let investors? The key takeaway from this month’s ONS report was the 5.1% annual increase in house prices across the UK – a healthy level of growth which represents a positive outlook for the market.
We ran some calculations and established that this 5.1% annual increase would equate to a huge 17% return for investors who leveraged their buy to let property. You can read more about the benefits of leveraging here.
Let us explain: If you purchased a £100,000 buy to let property using 30% deposit (£30,000) and 70% mortgage (£70,000) – your property value would now have increased to £105,100 (5.1% growth). This is a 17% return on the initial cash deposit you used to purchase your property. This does not take into account the annual profit from rent either, which would boost this figure even further dependent on what rental yields your property is achieving.
Here are a few examples based on various property prices:
property value |
% increase |
New Value |
Increase in Property Value |
cash invested at 70/30 LTV |
return on cash invested as a % |
£100,000 |
5.10 |
£105,100 |
£5,100 |
£30,000 |
17.00 |
£135,000 |
5.10 |
£141,885 |
£6,885 |
£40,500 |
17.00 |
£170,000 |
5.10 |
£178,670 |
£8,670 |
£51,000 |
17.00 |
*Read the full ONS House Price Index here.
If you have multiple buy to let properties, you could be looking at a substantial return on your investment.
Essentially, no other investment can provide such strong returns based on the cash you invest, and with house prices continuing to increase, it’s clear that buy to let continues to provide a solid investment for the future. If you’d like to find out more about investing in property and how to make owning buy to let property work for you, contact Sequre today on 0800 011 2277.