Landlords open to expansion

The latest property survey found that there is still significant appetite to invest in property, despite most of those surveyed understanding that they would be affected by the changes to income tax liability. Around 75% of those looking to buy said that buy-to-let would be for part of the mix, while houses in multiple occupation (HMOs) were also flagged as an option.

What’s really happening is the market is getting far more specialised. Portfolio landlords are coming to the fore, as fewer people are getting into buy-to-let as an alternative pension strategy. It seems the “serious” landlord is very open to expansion particularly in the (HMO) sector.

The buy-to-let mortgage market has changed significantly over the past 3 years and has become far more specialised. With HMO’s and limited company mortgages taking more centre stage.

Landlords are buoyant and prepared

Landlords are still reducing borrowing as levels of gearing – the ratio of long-term debt compared to its equity capital – reached an all-time low in quarter 4 of 2017.

Based on a review of landlords, the report established that the average loan-to-value (LTV) of investment property portfolios was 36.5% in Q4 2017, the joint-lowest level recorded in over 12 years.

With all the recent regulatory changes, landlords have less motivation to take higher LTV buy-to-let mortgages. However, respondents appeared confident of coping with increased outgoings, with over 50% of landlords saying that mortgage interest rate does not determine any decision to buy or sell properties.

It seems very clear landlords are less willing to take higher loan-to-value mortgages and borrow more, whilst regulatory changes, though welcomed by lenders, have constrained the market in its ability to offer higher LTV mortgages.

Landlords believe

Almost half of the UK population believe property is the best way to make the most of their money when saving for retirement, the latest Wealth and Assets survey from the Office for National Statistics reveals.

In total, 52% picked out property as a sound investment, and the majority agree this is likely to continue for many years to come. Landlords have been hit from all directions of late with profitability becoming harder and harder. However, the majority hang onto the belief that the long-term value will increase and therefore giving a good return on the original investment.

Since July 2010 and continuing into the latest period of July 2016 to June 2017, the percentage of people identifying property as making the most of their money has been increasing, which may reflect a growing confidence in property prices over this period.

Top performing Cities

Despite a barrage of tax changes making it harder to make money on buy-to-let, there are still pockets of the market where investing can be very profitable.

A recent report on buy-to-let yields available across major towns and cities in the UK found that Liverpool and Nottingham are now the UK’s best performing property investment locations.

According to the research, both cities enjoy average rental yields of 6.2% once mortgage costs are taken into account. Liverpool has retained its top position since May 2017, although the city has seen rental yields compress due to falling rental prices.

In third position is Cardiff, with average yields of 6% after the average rent paid in the city rose from £946 to £1,301 over the past three months.

Significantly, London and the South East are absent from the top 10, as high purchase costs have put a severe dampener on yields. Rents in the capital have also been coming down, as renters appear to have maxed out what they can afford to pay each month.