Investment News – Property investment news points to bigger BTL profits

Rents up and mortgage rates down in a quiet UK property market

Investment news over the last week has been mostly positive for property investors. As I discussed in my property rant “Why I laughed when they said buy-to-let is dead!”, 2016 saw a lot of negative headlines for residential property investment. The bad vibes ranged from Brexit to tax changes, to Trump.

Now, there’s not a lot you can do about Brexit and Trump. But, you can choose how to invest to minimise your tax bill. Strategies include:

Still, the question of whether buy-to-let investment is worth it persists in the press. So, here’s a reason: increasing profit margins. That’s what the latest property investment news is telling us.

Buy-to-let mortgage rates hit record lows

Rates on five-year fixed interest buy-to-let mortgages have edged up, and are now above the three-year average rate. But, new data from Mortgages For Business shows that both the two-year and three-year fixed rate products have fallen to their lowest average rates ever, at 2.92% and 3.76% respectively.

The five-year fixed rate now averages 3.77%. It could be a great option for an investor who wants to lock in a low rate. You’ll protect yourself against the possibility that the Bank of England will raise rates as inflation picks up.

Lower rates, of course, mean lower costs. And lower costs translate into wider profit margins. But lower rates isn’t where the good news ends for property investors.

Rents are rising faster than inflation

  • Landbay has reported that over the last year, rents in 20 areas in the UK increased by more than inflation. In fact, average rents in these areas are up by at least 3% over the last 12 months. Here are a few highlights: In Luton, rents have increased by 6.5%, with average annual rent now costing tenants £9,354.

 

  • In Northamptonshire, annual rent increased by 5.1% (£409).
  • In Peterborough, rents rose by 4.8% (£340).
  • In Edinburgh, buy-to-let investors now receive an average of £521 more rent than they did last year (an increase of 4.6%).

These types of rent rises have, at least in part, led to the government’s white paper, “Fix Our Broken Housing Market”.

Industry not convinced by government’s Housing White Paper

The government released its white paper, but the industry appears to be less than convinced. It covers areas that include:

  • Supply and demand issues
  • Planning permission for greenbelt land
  • Mixed tenure approach
  • Encouraging institutional investment
  • Longer tenancies and leasehold reform

While many experts agreed that action needs to be taken, the report was perhaps best summed up by Jeff Doble, CEO of London-based estate agent Dexters. He said:

“The stalled sites initiative is misconceived, it is likely to create unintended consequences. It is a classic case of “Nanny knows best”, with the Government failing to understand the issues by being too quick to dismiss the views of the industry.

Once again, this is too little too late in my view – tinkering around the edges, rather than dealing with the causes for the slow rate of new build – the planning system, associated charges and stamp duty. It is impossible that these measures will create the step-change that the government says it needs to reach its 2020 target of one million new homes. Brownfield land is often more valuable in existing use than risking the enormous costs, delays and uncertainty of the planning system.”

In other words, the mismatch between supply and demand is not only unlikely to go away, but will probably grow. And that will probably continue to push property values and rental prices up.

Stay abreast of all the property investment news that matters. Contact one of our team today on +44 207 923 6100, and ask about our newsletter. We give it to you straight. No BS. No hype.

Live with passion

Brett Alegre-Wood

 

About the Author

Brett has over 20 years experience in all facets of property, he owns various companies centred around property and is the driving force behind the education and training at Gladfish. His companies have sold over £850 million in UK and London property and he manages over 1200 properties through his estate agency chain. Today he shares his time between UK, Australia and Singapore. He is married to Arlene and together they have 4 kids.

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