Number of buy-to-let investors up 8% in a year
The total number of buy-to-let investors in the UK has risen by 8% in the last year, to 1.63 million last year up from 1.51 million in the previous year – an increase of 120,000, said ludlowthompson, London’s letting agent.
The net income rental income minus all costs of these investors reached £13.1bn in 2012/13, 8% higher than the £12.1bn net income in 2011/12, according to ludlowthompson.
Record low interest rates on bank deposits and government bonds means that the sector is continuing to attract new money as investors struggle to achieve comparable yields from other investment and savings products.
ludlowthompson said that 5-6% yields on investment properties remain achievable in some parts of London.
Capital growth for residential property was over 7% in 2014 and 16% for property in London whilst the FTSE-100 increased by only 0.7% in a year.
Stephen Ludlow, chairman at ludlowthompson, said: “The high yields on offer from buy-to-let investments make this asset class one of the few options for investors who want to avoid the volatility of the stock market. A fall in inflation has also calmed fears of a sharp rise in interest rates.”
Stephen Ludlow said that recent regulatory changes to the mortgage market are making it harder for potential first time buyers to acquire mortgages – meaning that they stay in the rental market for longer.
ludlowthompson explains that the popularity of buy-to-let will continue to increase in the upcoming year, with the reforms to stamp duty announced in the Autumn Statement benefiting investors. The changes see all purchases below £937,500 benefit from lower stamp duty costs – the vast majority of BTL investments fall into this bracket.
Stephen said: “Also, pension changes announced last year, should allow potential investors to use these funds for a property purchase, offering far greater yields than pension funds.”
Other factors that may increase the popularity of buy-to-let include:
– Low levels of social housing creation – the requirement to keep public spending in check has reduced the supply of new social housing keeping a possible competitor to the private rental sector in check
– Planning the UK has relatively strict planning regulations compared with its European peers. With a lack of brownfield land available and restrictions on developing on the greenbelt that surrounds London, prices are more susceptible to increases in demand
– Improving economy and job growth – the London Development Agency predicts that there will be over 500,000 new jobs in London by 2020. This job creation will lead to a rise in demand for accommodation among workers (both domestic and foreign) looking specifically for flexibility of tenure
– Regeneration – the development of private sector projects and the accompanying obligations under the Town and Country Planning Act 1990 to provide or contribute to projects will benefit new and existing communities. This is likely to lead to regeneration and gentrification of certain areas within London, which may lead to an increase in rents and capital appreciation
– Improving transport links – over £70bn of public money has been committed to transport projects within the Greater London network. Increased connectivity and greater capacity is likely to result in broader investment and development around the new transport hubs, improving the surrounding residential market and unlocking value both in terms of increasing rents and capital appreciation