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UK buy-to-let has ‘defied gravity’ through Covid-19, says S&P

The UK buy-to-let (BTL) market remained resilient through the Covid-19 pandemic and has features that could help it remain buoyant, says S&P Global Ratings in a new report.

Amid the pandemic-related lockdowns, private sector UK rental arrears reached 9.0 per cent by the end of 2020, but the S&P RMBS post-2014 originations buy-to-let (BTL) index recorded total delinquencies no higher than 0.5 per cent.

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“Diversification in terms of property and borrowers, the increasingly professional nature of BTL, and generally high debt servicing ratios has helped buy-to-let performance remain resilient,” says S&P Global Ratings credit analyst Alastair Bigley.

For post-2014 originations, approximately 50 per cent of properties at a portfolio level could be in rental arrears in the short term before it would affect debt service and cause a significant spike in arrears.

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Ultimately, Covid-19 represented a shock to only one risk factor that determines BTL performance – tenant affordability – while other factors such as the prevailing interest rate environment and house prices were supportive.

“Looking forward, although peak stress for landlords may be argued to be over, the recent prominence of 95 per cent owner-occupied lending may facilitate some renters to become buyers and change the supply-and-demand dynamics for certain properties, and make some properties harder to rent,” says Bigley.

Source: Property Funds World

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Confidence in buy-to-let business continues to grow among brokers

In Q2 2021, the proportion of brokers forecasting a rise in buy-to-let mortgage business over the next 12 months has increased.

Despite the tapering of the stamp duty holiday, a survey by Paragon reveals 53% of mortgage brokers expect buy-to-let business to increase over the next year. This is compared to 50% in the first quarter of 2021. At the same time, the proportion of brokers forecasting declining levels of business stayed consistent at 10%.

Moray Hulme says: “These figures suggest that the strong levels of buy-to-let business witnessed over the last six to nine months wasn’t just as a result of the Stamp Duty stimulus, but down to more fundamental shifts in where and how people want to live.”

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Buy-to-let demand is high

During the second quarter of 2021, brokers reported that demand for buy-to-let was high. Specifically, 42% of intermediaries said demand was “strong”. And 8% stated demand was “very strong”. In the second quarter of 2020, which was at the height of the pandemic, there were only 26% who felt this way.

Additionally, only 10% of those surveyed reported buy-to-let demand to be weak. That is compared to 30% during the corresponding quarter last year.

Overall, the confidence among brokers is generally high. In the survey, 91% said they were confident about the outlook for their business over the next year. This was especially prevalent for those seeing high levels of buy-to-let business with 97% among that cohort.

“There has certainly been a growth in tenant demand for family homes, for example, and landlords are reacting accordingly.”

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Investing in buy-to-let

With demand in the private rented sector at high levels across the UK, this is providing a boost to the buy-to-let sector. Recently, many landlords have seen a drop in void periods and higher yields.

Additionally, the number of buy-to-let mortgages reached the highest level since March 2020. Investors and landlords have been welcoming the additional choice. With the increased competition, interest rates are still historically low.

Many landlords are locking in competitive mortgage deals. This is leading more buy-to-let investors to expand their property portfolio. Additionally, this year, more first-time landlords have even entered the buy-to-let sector due to the enticing market conditions.

By Kaylene Isherwood

Source: Buy Association

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The Best Areas in London for Buy-to-Let Yields This Year

Buy to Let – Since the onset of COVID-19, investors have turned away from many of the asset classes whose presumed security and capacity for long-term value creation were once thought unimpeachable. With international lockdowns accelerating existing trends towards flexible working practices and e-commerce, investors have seen billions wiped off the value of commercial property assets.

However, while commercial property has suffered, the value of residential assets has fared well during the pandemic. Thanks to the extended stamp duty holiday, the sales market is buoyant and price growth has exceeded expectations, while a surprisingly robust lettings market benefited from permission to continue operating during later lockdowns and a flurry of activity as renters seek out housing that more closely aligns with their post-COVID priorities.

At Home Made, we have analysed data from thousands of property listings across London to create an up-to-date guide on buy-to-let rental yields for investors in the capital. Here are the top 10 postcodes in London offering investors the best rental yields for 1, 2, and 3-bedroom properties.

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1-bedroom properties

  1. IG11 (Barking, Upney) – 6.12 per cent
  2. N9 (Lower Edmonton) – 5.89 per cent
  3. TW13 (Feltham, Twickenham) – 5.65 per cent
  4. EN8 (Cheshunt, Waltham Cross) – 5.57 per cent
  5. IG1 (Ilford) – 5.56 per cent
  6. EN3 (Enfield) – 5.50 per cent
  7. RM6 (Chadwell Heath, Goodmayes, Marks Gate, Little Heath) – 5.46 per cent
  8. RM1 (Romford) – 5.43 per cent
  9. RM7 (Romford, Dagenham, Hornchurch) – 5.39 per cent
  10. IG2 (Gants Hill, Newbury Park, Aldborough Hatch) – 5.35 per cent

2-bedroom properties

  1. UB1 (Southall) – 5.93 per cent
  2. IG11 (Barking, Upney) – 5.64 per cent
  3. EN3 (Enfield) – 5.52 per cent
  4. RM6 (Chadwell Heath, Goodmayes, Marks Gate, Little Heath) – 5.48 per cent
  5. N9 (Lower Edmonton) – 5.42 per cent
  6. TW5 (Hounslow) – 5.39 per cent
  7. N18 (Upper Edmonton) – 5.39 per cent
  8. IG1 (Ilford) – 5.37 per cent
  9. IG3 (Ilford, Cransbrook, Loxford) – 5.35 per cent
  10. RM1 (Romford) – 5.33 per cent

3-bedroom properties

  1. RM8 (Dagenham, Beacontree) – 5.13 per cent
  2. RM9 (Dagenham, Beacontree) – 5.01 per cent
  3. RM10 (Dagenham, Beacontree) – 4.90 per cent
  4. IG11 (Barking, Upney) – 4.80 per cent
  5. EN3 (Enfield) – 4.76 per cent
  6. RM3 (Harold Wood, Harold Hill) – 4.64 per cent
  7. N9 (Lower Edmonton) – 4.61 per cent
  8. CR0 (Croydon) – 4.56 per cent
  9. N18 (Upper Edmonton) – 4.54 per cent
  10. CR7 (Thornton Heath) – 4.54 per cent

Overall

  1. IG11 (Barking, Upney) – 5.13 per cent
  2. RM10 (Dagenham, Becontree) – 4.97 per cent
  3. RM9 (Dagenham, Becontree, Castle Green) – 4.94 per cent
  4. RM8 (Dagenham, Becontree, Becontree Heath, Chadwell Heath) – 4.91 per cent
  5. SE28 (Thamesmead, Greenwich, Bexley) – 4.88 per cent
  6. E13 (Plaistow, West Ham) – 4.59 per cent
  7. RM3 (Harold Wood, Harold Hill, Noak Hill, Harold Park) – 4.54 per cent
  8. N9 (Lower Edmonton) – 4.44 per cent
  9. E6 (East Ham, Beckton, Barking) – 4.40 per cent
  10. RM6 (Chadwell Heath, Marks Gate, Little Heath, Goodmayes) – 4.35 per cent

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What does the data show and why?

As the data indicates, the most attractive investment prospects right now are mainly clustered in London’s outermost Eastern boroughs: Barking and Dagenham, Redbridge, and Havering. A review of our previous yields analysis (published in late 2019) suggests that there has been a sustained eastwards shift in the location of postcodes offering the best potential ROI for buy-to-let landlords.

There are several likely reasons why this is the case, with trends established both before and during the pandemic responsible for the continuing eastwards shift.

Improvements to transport infrastructure

As was the case in our original 2019 analysis, improvements to London’s transport infrastructure mean that residents in high-yield areas can commute into the major economic hubs of the city centre with relative ease. The forthcoming Elizabeth line will drastically improve transport connections between many of this year’s best performing locations to the rest of the TfL network, with stations opening in Ilford, Goodmayes, Chadwell Heath, and Romford. We know that rental prices react more quickly than sales values to infrastructural improvements, so investors should expect to see an even greater spike in rental yield value in these East London suburbs.

The impact of urban redevelopment

Urban redevelopment schemes that introduce thousands of units of high-specification housing and modern amenities tend to change the profile of tenants, making them more attractive to working professionals on higher incomes. This increases the value of nearby property, leading to a sustained rise in rental yields over the medium term as rental price growth outpaces the growth in sales prices.

East London’s outer boroughs are currently further behind in their redevelopment journey than many of the more central neighbourhoods that have already been transformed by various urban renewal projects (e.g Stratford, Royal Docks). Ambitious redevelopment plans underway in the East, particularly in Havering, are set to have a similar impact, and investors should expect to see consistent growth in rental yields along with significant appreciation in the sales value of any property.

Consumer and renter behaviour

Tenant migration patterns have been altered significantly by COVID-19. Since the onset of the pandemic, the widespread adoption of flexible working practices has meant that renters have had more freedom to move across the city without as much concern for the impact on their daily commute. When we analysed enquiry data for rental properties in TfL travel zones 4, 5, and 6, we found that 40 per cent of the renters enquiring on properties in these areas were currently based in zones 1, 2, and 3, suggesting a significant spike in the number of tenants moving towards London’s suburbs. Similarly, 64 per cent of the renters logged in our database in 2020 were moving to a completely new area of the city, with an average travel time of 44 minutes between their previous property and prospective new home.

As well as having the flexibility to stray further away from the workplace, tenant priorities have changed drastically following our collective experiences of successive lockdowns. The so-called ‘race for space’ is well documented, with many tenants moving to the suburbs or leaving the city altogether in search of larger properties with more access to green space and better suited to pet ownership – features which are now a higher priority for many than proximity to the workplace.

Many have also moved further away from the centre to reduce costs during a period of sustained economic upheaval. For many of London’s working professionals, it no longer makes financial sense to pay a premium for expensive central property when there is no need to maintain a daily physical presence in the workplace. Properties in high-yield areas are able to satisfy both the post-COVID lifestyle priorities and affordability criteria of London’s renters.

Overall, the residential lettings market has proven remarkably adaptable when faced with unprecedented economic and social circumstances, along with various existing trends that disrupt the way people rent and let property. As a result, buy to let rental yields in outer zones have remained high, and even increased in the last 18 months, as renters expanded their search radius to include the new areas that they would now consider living in.

BY PETE CARVILL

Source: Property Wire

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Falling buy-to-let rates make property a ‘tempting’ investment

Interest rates for buy-to-let mortgages are beginning to decrease, according to the latest data from Moneyfacts.co.uk.

Its figures revealed, since the start of May, the average buy-to-let two and five-year fixed rates for all loan-to-values (LTV) have fallen by 0.04% and 0.05% respectively.

What’s more, since March 2021 they have tumbled by 0.10% and 0.11%. At 2.95% and 3.30%, both rates are now the lowest they have been since January 2021 when rates were at 2.89% and 3.27% respectively.

According to Moneyfacts the largest reductions since the start of this month have been seen at 65% LTV.

In this tier the two and five-year fixed averages have dropped by 0.20% and 0.15% respectively to 2.68% and 3.17%, since the start of the month.

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This, said Moneyfacts, was great news for landlords with the required level of deposit or equity.

However, for those landlords with lower levels of deposit or equity the news is not so welcoming as the average two-year fixed rate at 80% LTV has slightly increased over the course of this month to sit at 4.20%.

There are more options available to borrowers in this tier, though, where rates are traditionally higher due to the higher level of risk, have also risen.

And those happy to lock into a five-year fixed rate at 80% LTV will benefit from average rate drops of 0.04% since the start of the month.

Eleanor Williams, finance expert at Moneyfacts.co.uk, said: “As lockdown restrictions begin to ease, the prevailing sentiment in the UK seems to be that of optimism.

“For a sector that has been beset by various changes and challenges over the last five years or so, the buy-to-let market is exhibiting remarkable resilience.

“While it goes without saying that the last year has presented great challenges to many investors in the sector, the latest Lettings Index from Hamptons illustrated that rents have risen by 5.9% in Great Britain in April 2021, the fastest rate of growth it has recorded since January 2015.”

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Williams added that the rate drops demonstrated an appetite from lenders to cater to borrowers who are keen to invest.

She revealed, as providers continued to tweak their ranges, Moneyfacts had seen rate reductions of as much as 0.90% from TSB, while Virgin Money made cuts of up to 1.06% on a selection of its products this month.

“Hampton’s indicated that the rise in rental growth may well be linked to the fact that there were 45% fewer homes available for rent in April 2021 compared to April 2019,” Williams added.

“For investors contemplating an expansion into the buy-to-let sector, demand from tenants is booming and while it remains difficult to earn a decent return on many forms of investment, it’s understandable why rental property could be a tempting option.”

Source: Mortgage Finance Gazette

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Govt’s proposals on renting reforms expected to improve BTL reputation

Government proposals on renting reforms could improve the buy-to-let sector’s reputation, brokers have said, although a warning has been sounded on their effect on the investment appeal for landlords.

In yesterday’s Queen’s Speech (May 11) the government said it would ‘enhance’ the rights of those who rent, in addition to helping more people own their own home.

Measures proposed by the government in its policy paper included bringing forward reforms this year to drive improvements in rented accommodation standards, well targeted enforcement that drives out criminal landlords, and exploring the merits of a landlord register.

The government also said the reform package was expected to require all private landlords to sign up to a redress scheme for tenants.

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Ben Beadle said the government’s proposals amounted to some of the biggest changes in the private rented sector in 30 years.

Beadle added: “We welcome the government’s ambitions to drive out bad landlords from the sector without penalising those who do the right thing. We want to root out all those who bring the sector into disrepute.”

Bob Young likewise said “proportionate and fair” measures would benefit both tenants and ‘good’ landlords.

Young said: “For decades now a small minority of landlords have effectively got away with properties that are not suitable for habitation and as a buy-to-let lender we’ve seen some appalling examples of this.

“This minority is damaging the reputation of the vast majority of landlords who look after their properties and are responsive to their tenants’ requests.”

In its policy paper the government also said it would publish its consultation response on abolishing ‘no fault’ evictions and strengthening repossession grounds for landlords when they have valid cause.

Paul Brett commented: “There is an absolute need for landlords to be able to retake possession of their properties when circumstances dictate that they need to, but tying this with changes to drive up standards is the right thing to do.

“This will support responsible landlords, which in turn will enable them to help more tenants.”

In 2019 the then-government announced proposals to prevent private landlords from evicting tenants at short notice and without good reason before launching a consultation.

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Under section 21 of the Housing Act, private landlords can repossess their properties from assured shorthold tenants without having to establish fault on the part of the tenant.

Angus Stewart said: “Landlords have been bracing themselves for the Renters Reform Bill for some time now, so we welcome the fact we now have a way forward.”

Stewart added: “Landlords need to know they can take back properties when they have a legitimate reason for doing so and tenants need to be able to plan their futures.

“We should not forget mortgage lenders who will be looking for reassurance as to their rights as creditors. Getting the balance right will be crucial and as ever the devil will be in the detail.”

But Bulent Kandemir said the renters’ reforms come after private landlords have been “hit very hard” in the past few years, such as with restrictions to income tax relief.

Kandemir added: “I would question whether these landlords have the appetite to keep doing this going forward, as the profitability of owning a property to let is arguably no longer there.”

By Chloe Cheung

Source: FT Adviser

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Brokers warn of buy-to-let issues with new fire safety law

Mortgage brokers have warned of difficulties for buy-to-let landlords in selling and remortgaging flats, after a majority in the House of Lords voted against an amendment to the new Fire Safety Act.

The amendment sought to prohibit tenants and leaseholders from being liable for the remedial costs of meeting fire safety requirements if they exceeded £500, until a statutory scheme is implemented.

MPs disagreed to four versions of the amendment, as the issue of remediation costs was “too complex to be dealt with in the manner proposed” by the Lords.

The act, which clarifies where responsibility for fire safety lies in multi-occupied buildings in England and Wales, became law last week.

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Amid a ban on evictions, which is currently due to end on May 31, brokers have warned that without this amendment, the act will prevent buy-to-let landlords from refinancing – particularly if they are leaseholders in a block of flats.

Hiten Ganatra said this was particularly due to the fact many lenders now insist on an EWS1 form, which is an industry-agreed way for a building owner to confirm that an external wall system on residential buildings has been assessed for safety by a suitable expert.

Ganatra said: “This is an incredibly delicate situation, which will negatively impact many buy-to-let landlords who have invested in flats, especially if these landlords are already facing financial challenges from non-paying tenants as a result of the Covid eviction ban.”

He added: “Their investments could become unsellable and the problem could be exacerbated even further with tenants being worried about moving into flats in the absence of having confirmation that remedial works have been completed.

“This could also severely hinder buy-to-let landlords’ ability to refinance, as most buy-to-let lenders are insisting on EWS1 forms giving the building a clean bill of health, before allowing the mortgage to go through.”

Dominik Lipnicki questioned the fairness of buy-to-let landlords potentially being required to cover remedial costs of any affected leasehold properties.

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Lipnicki said: “How can it be right that innocent buy-to-let landlords who have invested in leasehold properties will now be responsible for a huge potential liability to correct fire and safety issues that they were simply unaware of, rendering many of these properties unsellable and impossible to remortgage?”

In February the government announced it would fully fund the cost of replacing unsafe cladding for all leaseholders in residential buildings in England that are at least 18m high.

Meanwhile, a scheme was announced to enable leaseholders of lower-rise buildings (between 11m and 18m) to pay for any necessary cladding removal through a long-term, low interest, government-backed financing arrangement.

But in a report published last week (April 29) the Housing, Communities and Local Government Committee said proposals to fund cladding remediation on buildings below 18m through a loan scheme should be “abandoned”.

It called for an “enhanced” fund open to all buildings with existing fire safety issues, without barriers based on height, types of tenure or the nature of fire safety defects.

By Chloe Cheung

Source: FT Adviser

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Buy to let – Rental yields reach three year high

During the first quarter of 2021 average rental yields have increased to 6.0%, the highest recorded in three years, research from Paragon Bank has revealed.

Rental yields have climbed by 0.2% from 5.8% in Q4 2020 to 6.0% in Q1 2021. This represents a year-on-year increase of 0.7% after landlords said they were able to generate average yields of 5.3% in Q1 2020.

As part of a survey of just under 900 landlords, carried out by BVA BDRC on behalf of Paragon Bank, landlords were asked what rental yield they currently receive, taking into account rental income as well as any mortgage, maintenance and other costs associated with running their letting portfolio.

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The highest average rental yields are currently achieved by those managing lettings businesses in the South West (6.7%) and North East (6.6%). Landlords with property in Central London continue to achieve the lowest yields at 5.4%, due to higher average property prices in the capital.

Correlation between typical yields generated and portfolio sizes were also identified after single property landlords recorded average yields of 5.7%, while landlords who operate portfolios containing 20 or more properties responded saying they are able to generate average yields of 7.1%.

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Richard Rowntree, managing director for nortgages at Paragon said: “Rental yields are a key measure for landlords so it’s encouraging to see them indicate being able to generate average yields of 6.0%.

“The fact that this is a 3-year high and is being reported alongside continued high levels of tenant demand suggests that the private rented sector has bounced back well from the Covid-19 pandemic and is actually stronger as a result of providing stable homes for tenants during the challenges of the past year or so.”

Source: Mortgage Introducer

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Rise in Landlords Purchasing BTL Properties through Limited Companies

Rising numbers of UK and international landlords are choosing to register as a limited company to manage their BTL portfolios and to take advantage of sizeable tax benefits.

Thirlmere Deacon has seen a spike in international investors enquiring about forming a limited company, up 62 per cent year on year. It claims that further findings reveal that there were a record number of new limited companies set up in 2020, with 228,743 buy-to-let firms up and running.

Last year, there were a total of 41,700 buy-to-let incorporations, an increase of 23 per cent on 2019. The numbers have more than doubled since 2016, rising 128 per cent, when tax changes for landlords were introduced. Between the beginning of 2016 and the end of 2020 more companies were set up to hold buy-to-let properties than in the preceding 50 years combined. Companies set up to hold buy-to-let properties were the second most common company founded during 2020, with companies selling goods online or by mail order in first place.

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More than a third (34 per cent) of all companies set up to hold buy-to-let properties in 2020 were in London. Together, London and the South East accounted for almost half (47 per cent) of all incorporations.

Stuart Williams, founder and CEO of Thirlmere Deacon, said: “If landlords hold property in a limited company, they have the ability to offset 100 per cent of mortgage interest against profits, while those holding a property in their own name can offset just 20 per cent. Investing in property through a company provides landlords with higher levels of tax relief and personal tax savings. Landlords can grow their BTL portfolio more quickly, as there is no income tax on the retained profit, thus allowing more cash to re-invest. Although corporation tax is payable on trading profits, this is lower than the higher income tax rate.”

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He added: “However, running a portfolio through a limited company is not right for everyone. One of the main benefits of remaining a private landlord is that any post-tax profits can go straight into their pocket. Profits can be used then for anything they choose – all paid for by the tenants.”

BY PETE CARVILL

Source: Property Wire

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BTL Mortgage Offers Available To Landlords Climb Back Up

There are now 2,333 BTL mortgage deals available to landlords, the highest number since March 2020, when there were 2,897 deals available. While this has resulted in more choice for landlords, average rates have also risen.

The average five year fixed rate now stands at 3.41 per cent; its highest since September 2019 when it reached 3.44 per cent.

The average two year fixed rate currently stands at 3.05 per cent, again the highest in nearly two years. In June 2019 it also stood at 3.05 per cent.

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‘It is important to note that these are averages, and therefore while representative of the market as a whole, there are some very competitively priced products available, with some – depending on LTV and criteria – available at below 2 per cent’, said Moneyfacts’ Eleanor Williams.

‘Therefore, those who are hoping to refinance or take on a new deal would do well to shop around’.

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One other reason is that some deals offer incentives, such as free valuations or ‘no legal fees’. Williams said these are becoming scarcer ‘although interestingly, the proportion of the market where cashback is available has increased, not only year-on-year, but by 8 per cent over the last month’.

Source: Landlord Knowledge

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The buy-to-let boom is far from over, research has revealed

A year ago there were warnings that the buy-to-let market was looking increasingly bleak and that landlords were deterred from entering the sector, or quitting it altogether as a result of tax changes.

But despite scaremongering that there will be a ‘mass exodus’ of landlords, new data suggests that buy-to-let landlords are taking a far more pragmatic approach.

New data from Hamptons shows that last year 131,900 properties were sold by landlords in Great Britain, the smallest sell-off since 2013, when 105,830 properties were sold.

The research also reveals that the average landlord who sold up last year in England and Wales sold their buy-to-let for £82,450 or 42% more than they paid for it, having owned the property for 9.1 years on average.

The average landlord gross gain increased by £3,390 or 4% to £82,000 compared to 2019 – £79,060 – marking the first annual rise in more than five years.

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Landlords in London made the biggest gains. The average London landlord sold their buy-to-let for £302,200 or 71% more than they originally paid for it, having owned the property for 9.8 years on average.

Last year reversed the fall in a London landlord’s gross profit.  Despite the increase, typically landlords who sold in the capital last year made a smaller gross profit than those who sold in 2016 when they made an average gain of £364,960. 2016 marked the high point for landlord profit when many investors, having bought at the bottom of the market following the 2008 financial crash, decided to sell up.

The top 10 local authorities where landlords made the biggest gains were all in London.

Kensington and Chelsea topped the list. Last year the average Kensington & Chelsea landlord sold their buy-to-let for £784,980 more than they paid for it 10.6 years earlier.  The gain they made was 9.5 times greater than the average in England & Wales.  Camden, City of Westminster and Hammersmith & Fulham ranked second and third on the list, with the average landlord gain exceeding £500,000.

Landlords in the North East continued to make the smallest gains. The average landlord who sold up in the North East made £11,310 or 16% capital gain having owned for 8.0 years. Some 36% of investors in the region sold their buy-to-let at a loss, compared to just 12% in England & Wales overall.

This means that 37% of investors who sold in the North East last year would have paid capital gains tax (CGT) due to the sum being covered by their £12,300 annual allowance.  Across England & Wales, 77% of landlords would have paid CGT on their profit.  London landlords, who made the biggest gains, are most likely to have a tax bill to pay with 91% of investors making a gross gain surpassing the annual CGT allowance.  Investors can offset costs such as stamp duty and renovation expenses from their capital gains tax bill.

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The North East also had the highest share of landlords selling up.  Last year 24% of homes sold in the region were sold by a landlord.  This equates to around 9,730 homes.

Meanwhile, 17% or 15,540 homes sold in London were previously rented, down from 19% or 18,920 homes in 2020.

Some 9% of rental homes sold in Great Britain last year had been owned by a limited company landlord.  Last year,12,400 buy-to-let companies were dissolved. While the average buy-to-let company had operated for 6.2 years, 75% operated for less than five years.

Rental growth

In March, the average rent on a newly let home stood 4.4% higher across Great Britain than at the same time last year.  Regions outside London continued to see the highest rates of rental growth with rents increasing by 6.8% annually, the third consecutive month that annual rental growth outside the capital exceeded 5%. And apart from London, last month every English region recorded rental growth of at least 4%.

Rental growth in London continues to follow a different path, with rents falling 2.1%.  This marked the second month in a row that rents have fallen after turning positive between October 2020 and January 2021.  Once again, the fall has been led by Inner London where rents dropped 17.1%, the 13th consecutive month that rents have decreased.  While in Outer London, rents were 2.6% higher than at the same time last year, with tenants in Zones 3-6 viewing 48% more homes than in March 2020.

Aneisha Beveridge, head of research at Hamptons, said: “Last year, the number of homes sold by landlords reached a seven-year low.  A pause in the housing market during the first Covid-induced lockdown, which suppressed overall transactions, combined with an eviction ban throughout the remainder of 2020, limited the opportunity for landlords to sell up.

“Landlord sales have been relatively high over the last few years due to tax and regulatory changes that have reduced the profitability for some investors.  But given tax relief on mortgage interest will be fully phased out from the 20/21 tax year, it seems as though most landlords who would be hit hardest by these changes have already left the sector.

“Over the last few years, the average capital gain made by a landlord has been shrinking.  But despite the pandemic, stronger house price growth seems to have reversed this trend.  Landlords who have been in the game for the longest period of time have reaped the largest rewards.  The average landlord who owned their buy-to-let for more than 15 years made more than three times more than a landlord who had owned their property for less than five years.  Many of whom would have renovated and invested further in their property to add value.”

“Despite the gradual easing of lockdown, the London vs rest of the country rental growth divide remains entrenched.  Outside the capital would-be tenants are scrabbling over stock before it hits the portals, while in Central London landlords are chasing tenants just as relentlessly.  There are however signs of a return to Zone 1, with viewings up 64% year-on-year in March.  But record high stock levels mean rents are unlikely to start recovering to pre-pandemic levels until later in the year.”

Average landlord seller gain by region

RegionAverage Landlord GainYoY Change £Average % gainAverage length of ownership (years)
London£                      302,200 £         3,76071%9.8
South East£                      102,200-£         5,38045%9.2
East of England£                        90,590-£         2,63048%8.9
South West£                        68,250 £         2,16040%8.6
West Midlands£                        50,240 £         5,22042%9.0
East Midlands£                        44,560 £         2,96041%9.1
Wales£                        37,120 £         1,17038%9.6
North West£                        34,780 £            17036%9.0
Yorkshire & the Humber£                        30,800 £            94034%9.6
North East£                        11,310-£         3,50016%8.0
England & Wales£                        82,450 £         3,39042%9.1
Source: Hamptons & Land Registry

Top 10 local authorities where landlords made the biggest gains

Local AuthorityRegionAverage landlord gainAverage length of ownership (years)
KENSINGTON AND CHELSEALondon£784,98010.6
CAMDENLondon£735,2309.8
CITY OF WESTMINSTERLondon£627,04010.2
HAMMERSMITH AND FULHAMLondon£506,8009.5
ISLINGTONLondon£473,86010.2
HACKNEYLondon£392,69010.2
WANDSWORTHLondon£365,2209.4
BRENTLondon£355,2609.6
HARINGEYLondon£354,09010.2
HOUNSLOWLondon£347,79010.9
Source: Hamptons & Land Registry

Annual rental growth

Mar-20Mar-21YoY
Greater London£1,699£1,663-2.1%
     Inner London£2,570£2,131-17.1%
     Outer London£1,534£1,5742.6%
East of England£967£1,0215.5%
South East£1,050£1,1327.8%
South West£832£9089.1%
Midlands£694£7325.4%
North£644£6886.8%
Wales£654£7006.9%
Scotland£673£6963.5%
Great Britain£982£1,0264.4%
Great Britain (Excluding London)£832£8896.8%
Source: Hamptons

By MARC DA SILVA

Source: Property Industry Eye

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