Staggering home prices, adverse taxes and political uncertainty have led to a huge -40% price decrease in buy-to-let mortgages issued in the United Kingdom, according to a recent report from the US property portal, Rightmove. Mansion Global indicates that the disparity between a depleting rental supply and upswing in demand has led to stalled purchase prices in London. Investors wanting to expand their portfolios may want to pay attention here.
BUT, pay attention, potential investors. The British government began phasing out mortgage interest deductions on buy-to-let purchases in 2017, stamp duty taxes have increased on buy-to-let purchases, and “small, private investors who are accidental landlords,” according to Catherine Westerling, the national head of letting at Hampton’s International, are exiting the market.
With so much happening on the down side, why would investors be interested? Westerling believes that prices have softened enough to offset all the tax issues. She also believes that affordability concerns has made homeownership out of reach “for a lot of Londoners.” Demand for buy-to-let properties at all price points for all property sizes in all areas “is outpacing supply.”
According to Rightmove, rents in London have hit a record high. Average rental property is going for $2,653/month, an annual increase of +8.2%. Savills indicates that, over the next five years, letting values are forecast to grow by a staggering +11.5%.
Value in buy-to-let properties is also found in the purchase prices of these properties. Prices are down -3.8% compared with last year, the fastest pace of decline since 2009 and the seventh consecutive quarter of falling prices according to a report from the UK Bank and Nationwide.
Westerling firmly believes that “now is a good time to buy.” To those considering the London buy-to-let market, Westerling said, “…Take some good advice. Buy carefully and buy in an area where demand is always strong.” An area such as Knightsbridge, for example. Asked if she had money to spend now, would she buy in London? Westerling emphatically said, “Absolutely.”