It’s been an interesting week for our letting agency in London here at Intire Lettings, with some surprising statistics coming to light.
We all know that the British can’t stop talking about property, and buy-to-let landlords and investors across London are no different. The hot topic of discussion at dinner parties in Stoke Hill, Henleaze, and Chelsea Village amongst the movers and shakers is the subject of the London Property market, but in particular, the buy-to-let sector.
These people with money to invest in London are purchasing buy-to-let properties in BS postcodes quicker than ace Monopoly players – or so it would seem if we believe the Press reports and property industry surveys.
As leading letting agents in London, however, we like to take a closer look at the real story behind the headlines to ascertain the actual property investment trends taking place across London.
Is the buy-to-let market a sure-fire way to make money in London? Is it something everyone should be jumping on board? Is it a sure-fire way to make money? The answer is Yes and No.
Firstly, the Government gives tax breaks to buy-to-let landlords in London, as it allows the mortgage interest payments on a buy-to-let property to be tax deductible.
Also, a private landlord only has to flick through Rightmove or Zoopla, pick any property at random and agree a price. Then, find a modest deposit of 25% (often by remortgaging their own home) – which for an average London terraced house, would mean finding £57,097 for the deposit (as the average London terraced house is currently worth £228,389) and borrow the rest with a low interest rate buy-to-let mortgage in the city.
Finally, the buy-to-let landlord in London would rent out the property in a matter of hours for top dollar and live happily ever after, with the rent then covering the mortgage payments, with loads of money to spare and come retirement have a portfolio of rented property in London that would have quadrupled in value over the previous 15 years. Sounds wonderful – doesn’t it? However, is this the reality?
Let us not forgot that the half of one per cent Bank of England base rate is artificially low.
The international money markets can be fickle, and if interest rates do rise quicker and higher than expected because of some unforeseen global economic situation, that monthly profit will soon turn into a loss, as the mortgage will be more than the rent.
Even though tenants are staying longer in their rental properties in London, tenants still come and go, and my guidance to buy-to-let landlords in London is they should allow for void periods, plus the maintenance costs of a rental property, and of course, agents fees.
These are all things that eat into profit.
Interestingly, by my calculations, there are approximately 14,530 London landlords owing in excess of £2.7 billion in mortgages on those London buy-to-let properties.
An impressive amount, when you consider London only has 1.361% of all the rental properties nationwide. It really does come down to a number of important factors going forward to ensure you are watertight for the future.
A lot of our existing private landlords in London are fixing their mortgage rates.
One told me that the Metro Bank are currently offering a five-year fixed BTL remortgage rate at 3.79% for 5 years (based on a 75% loan).
I don’t give financial advice, so you must speak with a qualified mortgage advisor, but that sounds like a very fair deal for a buy-to-let landlord!
However, one thing I do know is that buy-to-let in London is a long-term investment: it’s a 10, 15, and 20-year plan and property prices will go down as well as up.
You wouldn’t dream of investing in the stock market without advice, so why invest in the London Property Market without advice?
We give bespoke and detailed advice to our buy-to-let landlords in London, to enable them to spot trends in the London Property Market before others, thus helping them to buy better properties at better prices.
For example, did you know that flats are selling for around 4% more than 12 months ago in London and detached properties are selling for 14% more (with every other type in between).
This means we can advise on which properties in London will go up in value better (or lose less if property prices drop), we can also advise which have lower voids and which properties have higher maintenance issues.
Information on the local property market and the ability to process it is the strongest asset we can give you as London property agents.
As Lois Horowitz, the famous author says, ”Not having the information you need when you need it leaves you wanting. Not knowing where to look for that information leaves you powerless. In a society where information is king, none of us can afford that”.