Property Downsizing: Opportunities for Investors
The housing market, over the last decade has been through a huge number of changes. From the financial crisis that put property prices at rock bottom to prices clawing their way back up to where they are now. Along with this, there is a shortage of properties and the demand cannot be met and that has caused investors to shift their focus onto buy-to-let properties.
In amongst all of this, there are those who are looking to downsize. Gone are the days when homeowners would own the same property for their whole life because the over 65s are now taking a financially-driven approach to housing and where they choose to spend the later stages of their life. Simply put, the over 65s are now actively planning for the future and their finances and so, more and more are looking to downsize.
Why are the over 65s downsizing?
As people get older, they become less mobile and less able to maintain a large property while there could be access problems in the future and so, downsizing means that they look to sell their current property and move into a smaller property. The whole idea makes perfect sense. Homeowners over the age of 65, sell their property, they move into a smaller property that is suitable for them as they grow old while releasing equity at the same time.
However, it is not as simple as this because there are now more over-65s looking to downsize than ever before. At one end of the market, you have first-time buyers who cannot get onto the property ladder because of prices and a lack of supply while at the other end of the market you have those looking to downsize yet facing a similar problem – a lack of options.
What does this mean for those who are downsizing?
A lack of options and sought after accommodation has meant that the market is saturated, effectively meaning that the supply does not meet the demand of those who want to purchase a property that they can call their home throughout the latter years of their life. As the market has adjusted to this increase in demand, it has meant that property that would be considered desirable to those over 65 has increased in value. Therefore, for those who are releasing equity from their current property, they are reluctant to invest it back into property that has been priced in a way that takes advantage of the demand and lack of supply. So, for those who are looking to downsize, it has meant that they need to consider looking at alternative options which includes rental property and this is where buy to let investment opportunities become a possibility for investors.
When people over the age of 65 make the decision to downsize property, they perhaps might feel as though time is not on their side when it comes to waiting for the right property to come along. As time passes by, it could result in them becoming unable to move home with them effectively missing their chance and so, ideally they want to move as soon as possible. In this case, they then find that they have no other option other than to consider rental properties as a serious option.
Opportunities for Investors
There are many properties out there that are suitable for those who are downsizing but make great opportunities for investors who are looking to take advantage of the lack of supply in property on the open market. These buy to let investment opportunities come in the form of purpose-built or converted residential properties, that make it possible for investors to offer rental properties to those looking to downsize. As a result, investors offer a feasible solution while also being able to take advantage of excellent returns at the same time.
Due to the high occupancy rates, it has meant that rental yields of as much as 10% can be achieved in some areas. Investors should focus on those specific areas where there are increased numbers of people who are aged 65 and over. There should also be a focus on areas such as the South as well as many of the popular areas in the North such as Liverpool, Bradford, Leeds and Manchester.
Investors have to consider that many of those who are looking to downsize still want to remain close to those areas that they are familiar with, while family will also play a role in the decision that they make. Despite this, this is a growing rental market that is enabling investors to capitalise on an area of the market that specifically appeals to those who are over 65.
Properties that are specifically designed with special features such as lifts, parking, wider doorways and are also located near to main roads and public transport should be a serious consideration for investors. Along with this, the over 65s are even considering facilities such as an on-site chef, spa facilities and social events held on-site because this is something that can provide them with all that they require as they grow older.
When investors find the correct buy-to-let investment that appeals to those who are downsizing, it means that they can expect to see returns that are significantly higher than other areas of the buy-to-let market. These buy to let investment opportunities offer excellent rental yields but also the chance of an increase in equity as the property increases in value. With rental yields of anything between 6-10% as well as yields that are assured for anything up to 3-5 years, it seems as though investors have a clear opportunity to invest in a thriving and growing market that is almost guaranteed to offer them a return, regardless of whether that is in the form of rental yields or equity.
As the number of people choosing to downsize increases, it means that more opportunities will present themselves to investors. This will enable them to take advantage of the residential properties that are currently available that not only cater to the needs of the over 65s but also offer an exceptional return on investment.