The Council of Mortgage Lender’s (CML) latest snapshot of the buy-to-let mortgage market shows us that property investment landlords haven’t been put off by the Chancellor’s announcement on the way that buy-to-let properties are taxed across the country.
Last month, the CML stated £1.4billion was borrowed by UK landlords to purchase 10,500 buy-to-let properties, up 26.5% from the same month in 2014, when only 8,300 properties were bought with a buy-to-let mortgage.
Go back two years, and the number of buy-to-let mortgages used for purchasing (again, not re-mortgaging) was 36.4% higher. Our London property agents noted this trend at the time.
Even more interesting has been the fact that the average amount borrowed has risen as well – the average buy-to-let mortgage last month was £133,330, up from £128,480 a year ago.
In London, I am speaking to more and more landlords, be they seasoned professional landlords or FTL’s (first-time-landlords), as they read reports that the London rental market is doing reasonably well, with rents and property values rising.
Interestingly, one property investment landlord in London recently asked me how much he should be paying per square foot – but more of that to come.
My advice as a leading letting agent in London would be this – the first thing you have to decide is whether you want great capital growth or great rental yield: because as every knowledgeable private landlord knows, you can’t have both.
Over the last 20 years, property values in London have risen by 305.94%, compared to 436.2% in Greater London.
This has proved that capital growth increases faster in the more expensive Capital, but your investment money doesn’t go very far – meaning there won’t be as much rental yield from a one-bed flat in Chelsea (2% per year, at best) as there would be from a two-bed semi in London.
However, whilst the figure of 305.94% is an average for the area, certain areas of London have seen capital growth much higher than that, and others areas much worse.
As an experienced letting agent in London, I’ve talked about those in previous articles.
If you recall in an earlier article, my research revealed that London apartments tend to generate a better rental yield than houses for investment landlords in BS postcodes – probably because several sharers can afford to pay more than a single family.
But houses tend to appreciate in value more rapidly and may well be easier to sell, simply because there are fewer being built.
So what buy-to-let properties should you be purchasing in London, and more importantly, for how much?
The average apartments in the City are currently selling for approximately £325 per square foot.
Terraced houses in London are currently obtaining, on average, £231,500 or £263 per square foot. An average semi in London is selling for £270,900 (and achieving £267 per square foot).
Now these are just averages – but it gives you a good place to start from: and as an experienced property agent in London, all investment landlords need a sensible starting point.
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