Landlords Set their Sights on Cheaper Buy-To-Let Properties

The latest research shows landlords are looking to invest in cheaper properties to reduce the impact of the recent stamp duty rate rises on second homes. The impact of the 3 percent stamp duty hike on second homes is starting to be felt as investors set their sights on cheaper properties. According to the latest data from Countryside, landlords are changing their investment habits in an attempt to offset  the increasing purchase costs. The research found the average price paid by a buy-to-let investor fell 8.3 percent month-on-month in April. The average price paid by a landlord was just £178,000, down from £194,000 in March. There was also a fall year-on-year on, with the average investment property costing £188,000 in April 2015. The biggest price reduction was seen in London, where the average price paid by an investor in April fell to £365,000, down from £436,000 in March. Although house prices in London have risen by 13.9 percent over the last year, it is clear landlords now feel lower priced properties represent a better investment. Cheaper areas steal London’s thunder In their search for lower priced properties, landlords are turning their attentions away from the buy-to-let market in the capital and towards more up-and-coming regions.  The number of enquiries is mirrored by eMoov’s national property index, which records the change in supply and demand for the most populated locations across the UK. The index monitors the total number of properties sold in comparison to the number on sale. It found that prime Central London and the North East had the least demand for property over the past three months. The top spots in the index were dominated by London’s outer boroughs and commuter belt areas. However, areas where house prices are lower, like Ipswich, Durham and Aberdeen, also experienced a significant increase in demand. Fewer landlords purchase homes Following a spike in activity in the first three months of the year, there was an expected lull in April as landlords reassessed their investment strategies. From January to March this year there was a 61 percent rise in the number of landlords buying properties when compared to the same period last year.  Many of the sales that would have normally completed in April were rushed through in March to avoid the 3 percent rise in purchasing costs. This resulted in around half the number of landlords buying a property in April 2016 than in April 2015. However, there was good news for first-time buyers and the first indications that the changes made to the buy-to-let sector could be having an effect. The number of sales to first time buyers rose by 19 percent in April 2016 when compared to figures for the same month last year. Rental prices have increased The good news for landlords who are still looking to invest in buy-to-let property is that rents are continuing to rise. Average rents increased by 2 percent over the last year, leaving the average monthly UK rent at £932.  Although the growth of rental prices has slowed since 2015 due to affordability constraints and the number of rental properties that are available, the rental market continues to grow. This is particularly the case in high demand areas like the London commuter belt. How can we help? Stamp duty rates on second homes might have increased but demand and rental prices of properties in the London commuter belt remains high, making Staines one of the UK’s buy-to-let hotspots.  Written in May 2016