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Investors should “plan ahead” by buying new-builds off-plan

Is now a good time to invest in property? That’s a question many existing and prospective investors are asking, and the advice is that those who plan well will see their purchases pay off.

For those who like to plan ahead, the concept of off-plan property investment may sound like the perfect option. It involves getting behind a property – or a block of properties – that is in the planning or construction stage, at a much cheaper price than the projected market value after completion.

Right now, off-plan properties are appealing to investors who like to plan ahead for another reason, too. With highly anticipated legislative changes in the pipeline to bring in new EPC (energy performance certificate) requirements on rental homes, new-builds are one of the surest way to stay ahead of the changes.

Other beneficial ways of future-proofing for investors include choosing up-and-coming locations with future regeneration and investment potential on the cards, staying ahead of any tax changes, and keeping an eye on your borrowing to ensure you are on the best mortgage product, particularly in the current market.

Investors should consider off-plan

Investors should also be prepared and plan for the predictable costs that come with running an investment property, as Abi Hookway, managing director of Redmayne Smith, points out.

“One of the biggest mistakes made by amateur property investors is not planning ahead for predictable costs, like the upkeep of homes,” she says.

“Personally, I put away 10% of my income every month to ensure that my tenants live in good-quality homes. This has provided me with loyal-long-term tenants – earlier this year, I had to raise my rents and didn’t receive a single complaint.”

Returning to the fact that new minimum energy efficiency standards (MEES) appear likely to come into force in 2025 for new tenancies, investors who let out their properties should be particularly mindful of the current EPC score of a property, or its potential, before making any new investment.

At present, the minimum EPC rating is E for rental homes. But with utility bills now sky-high, even homes that meet this requirement seem likely to be much less appealing to tenants going forward, and studies show that those who rent – as well as investors – are more likely than ever to prioritise energy efficiency above other factors.

As Hookway says: “Future landlords need to plan ahead for the upcoming changes to EPC ratings. Following this announcement, I would highly suggest new investors explore investing in new build or off-plan properties, as 80% of these have the highest ratings of ‘A’ and ‘B’.”

Focus on Birmingham, Liverpool and Manchester

In recent years, more and more investors have found better gains and yields away from London, which used to be a go-to hub for investment. While there are still many parts of the capital that are profitable, investors looking ahead at growth potential are increasingly hunting elsewhere.

According to Curtis Congreve, head of investments at Redmayne Smith, the cities of Birmingham, Liverpool and Manchester are particularly popular right now, as, he says “all of which provide more for your money, thus attracting big businesses and a captive audience of young professional renters”.

As mentioned above, areas which are penned for any major new regeneration or redevelopment – think HS2 in Birmingham, for example – are proving the most attractive to investors.

Congreve says: “We’re seeing a huge uptake in investors wanting major cities outside of London, which are far overtaking the demand for investment opportunities in smaller commuter towns. 80% of staff are able to complete work remotely and hybrid working has become an instant for many, lessening the residencies held in London.

“We are focusing our investment opportunities on cities that are seeing huge investment and regeneration, knowing that they will show the greatest returns for our clients.”

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