There has been constant speculation over how the raft of tax changes and ongoing political uncertainty in the UK will affect the overall buy-to-let market. Since the Brexit vote and the build up to the General Election this month, it was claimed that investors have adapted a ”wait and see” approach, however last month we saw a healthy rise in UK property value whilst landlords have been continuing to show a strong appetite for property investment.
House price growth has dominated a report published by Halifax which mentions an increase of 3.3% from the same period of 2016, although prices in the three months to May were 0.2% lower than the preceding quarter.
Despite house prices fluctuating, it has not deterred investors from extending their property portfolio, with many people looking to purchase more soon.
It has been reported in a Property Investor survey that the number of landlords looking to expand their portfolio in the next 6 months has risen from 45% to 48%. Interestingly, single-property landlords are more likely to expand their portfolio in the next 6 months than those who own two or more properties, although the difference is not huge. In November last year, 31% of landlords with more than 20 properties were looking to reduce the size of their portfolio, however this figure has substantially lowered to 17%. On average, only 9% of landlords are intending to sell their properties, showing that buy-to-let remains a great long-term investment opportunity.
The report suggests that landlords are now looking at properties which are further away from home with the number of landlords owning properties between 11 and 25 miles away increasing from 14% to 19%.
Overall investors are generally looking further afield to Northern cities such as Liverpool, which has recently been named as the number one hotspot for buy-to-let yields. Taking into consideration the costs of a mortgage, landlords can achieve rental yields around 8% on average in Liverpool. This is largely due to the combination of lower entry prices and strong rental prices which are on average £1,021 per month. According to the director of Private Finance, Shaun Church, succeeding in making buy-to-let a long-term profit ”depends on buying an affordable property and being confident its value will appreciate at a higher rate than mortgage borrowing”.
With landlords beginning to adapt to the tax changes and looking to invest in better locations, they are able to achieve better returns and cope with the changing environment in the market. Rising house prices are making it increasingly more challenging for young people to purchase their own house, so there will always be a high demand for rental accommodation.
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