Mon 12 Sep 2016 View all news articles

Buy-to-let activity surges in UK

Buy-to-let activity surged in the UK at the end of the summer.

New figures show that landlord demand rebounded in August, bouncing back from concerns surrounding rising costs and stamp duty charges. Indeed, the first three months of 2016 saw buy-to-let transactions soar, as investors raced to beat the 1st April deadline for the 3 per cent surcharge on additional residential purchases – a rush that brought many property deals forward from the second quarter of 2016, leaving the spring and summer suffering a slowdown in sales.

That slowdown occurred at the same time as uncertainty hit the market, due to the UK’s EU referendum. Now, though, buy-to-let is enjoying something of a post-Brexit vote bounce.

According to Connells Survey and Valuation, activity surged 12.7 per cent last month, which the firm suggests indicates that the stamp duty change has been absorbed by the sector.

“Now the effects of the Government’s legislation have been digested by lenders and investors alike, buy-to-let activity has increased sharply,” comments John Bagshaw, corporate services director of Connells Survey & Valuation.

Rents have certainly increased, as landlords seek to cover the costs of additional fees and also prepare for the reduction in mortgage interest tax relief, which will come into effect in April 2017 and could leave some smaller landlords operating at a loss.

The average rent for a one-bed property in the UK hit £1,010 in August, now over two thirds of the average disposable income of £1,4971, according to the latest Landbay Rental Index, powered by MIAC.

According to HomeLet, rents rose by an average of 3.1 per cent year-on-year across the UK.

Martin Totty, Barbon Insurance Group’s Chief Executive Officer, says: “Landlords are engaged in a delicate balancing act: they’re acutely aware of tenants’ concerns about affordability while also conscious of the need to achieve their target yields against a backdrop of rising costs. August’s figures suggest that rents are continuing to rise at a sustainable pace – ahead of price inflation, but well below house price increases, which were running at close to 6 per cent according to the most recent data.”

There are signs that rental pressure is easing on tenants, though, as one-bed rents grew by 0.1 per cent last month, and 1.7 per cent over the last year, behind wage growth of 2.4 per cent.

“The market’s fears over the impact of Brexit are calming,” adds Bagshaw, “and the Bank of England’s decision to cut the base rate last month for the first time in seven years may also have a psychological impact on property investors. Encouraging economic data, high levels of employment and fading fears of a recession have also injected life into the sector.”

HomeLet forecasts demand in the private rental sector to continue to grow, in line with demographic changes, such as population growth.

“As affordability concerns remain in the house purchase market, so it is important that we see efforts to support supply,” comments Totty.

Indeed, the private rented sector continues to be an important provider of supply for people who cannot afford to get onto the housing ladder. The government’s change to tax rules is still coming into force from April 2017, however, which remains a concern for many buy-to-let investors.

Source: The Move Channel

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