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Houses vs apartments – who comes out on top?
September 22, 2014Article by Charlotte Ashton
There’s no disputing the investment potential of rental property, where investors can enjoy ongoing yields while also watching their capital grow, but knowing which kind of property to invest in used to be something of a minefield. Thankfully, new research from Halifax has shed some light on the best kind of property to go for in terms of capital gains.
Forget the mansion
Based on figures spanning the past decade, Halifax’s research has shown that apartments have increased more in value than all other types of property, from starter houses to mansions. Average apartment prices rose 32% over the decade, increasing by almost £51,000. This equates to an investor getting an additional £425 every month in capital gains, in addition to whatever the property’s rental yield has provided. Martin Ellis, housing economist at Halifax, comments,
“The demand for larger properties has been partly constrained by a widespread lack of equity among homeowners who bought for the first time around the peak in the market, in 2007. It has been difficult for many of these homeowners to finance a move to a larger home, which has pushed up prices for flats as demand outstrips supply.”
Ray Withers, Chief Executive of leading property investment company Property Frontiers, which specialises in UK buy-to-let investments, knows that making money from apartments is also about choosing the right location. He explains,
“The Halifax survey reported the average price rise for an apartment as having been 32% over the past ten years. Obviously many apartments in fact generated even steeper price rises, thanks to their being in leading locations. Factors that influence such meteoric rises vary, but generally a good urban location, in a city that has ambitious long-term growth plans and a young, skilled professional population is the ideal environment for an apartment investment that will generate above-average price rises. Such apartments can also command excellent rental income.”
Withers has first-hand experience of the benefits of investing in buy-to-let apartments in leading locations. His company has cherry-picked some of the best deals around the UK in recent years on behalf of their investors. Buy-to-let apartments in cities such as Birmingham, Belfast, Bradford, London and Withers’ hometown of Oxford have been recognised as having that winning combination of capital gains and strong yields.
A promising future
“Apartment prices rose almost a third compared with average property price rises of just 15% over the decade covered by the Halifax research. Such an impressive difference is indicative of the huge increase in demand for apartments and we are seeing no signs of that abating. When it comes to property investment, the future is certainly promising so far as buy-to-let apartments are concerned. The buy-to-let house is dead; long live the buy-to-let apartment.”