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Real Estate

And the UK’s New Buy-to-Let Star Region Is….?

Real estate

It’s been well publicised that Buy-to-Let landlords have been hit in the pocket by recent updates to the tax regime around the investment class. However, according to a recent survey by property consultants Knight Knox, the Yorkshire and Humber region is still thriving. In defiance of the 3% stamp duty hit added to the cost of buying buy-to-let or second properties and landlords no longer being able to deduct mortgage interest from taxable rental income, average gross rental yields in the region rose last year.

Gross rental yields in the region rose slightly to 6.67% in 2017 from 6.63% in 2016, after taking into consideration the average increase in expenses faced by landlords. The result of that positive yield trajectory is that buy-to-let landlords with investment properties in the region also have the highest rate of intention to add to their portfolio over the next five years. Countrywide, the average is 40%, but in Yorkshire and Humber that is 50% higher at 60%.

Considerably more Yorkshire and Humber landlords are also ‘full time’ when compared to those from other regions. Almost half derived their primary income from renting out their investment properties. This compares to a third of London landlords. It all adds up to the impression that the region can be considered the UK’s current buy-to-let champion.

Buy-to-let is showing a drop in popularity with Savills data on buy-to-let mortgages taken out over 2017 showing a 26% drop on the previous year. Landlords in London and the South East, where yields to selling prices are lowest, are feeling the pinch of new regulations most. However, great returns are still achievable for investors open to moving off the beaten track when it comes to the regions in which they cast their nets for buy-to-let investment properties.

Investment properties located in Scotland’s Inverclyde region produced an average gross rental yield of a whopping 9.9% last year. Those in Hartlepool and Country Durham weren’t far behind at 9.6%. Yields are highest in the UK regions where selling prices are cheapest. The North East, one of England’s cheapest regions for property, generated average gross rental yield of 7.71% from investment properties, Scotland just shy of 7% and Northern Ireland 6.84%. Welsh properties also comfortable cleared 6% at 6.39%.

Another major change in the buy-to-let market is that a strong majority, 70%, of new rental properties are now being acquired through companies rather than as private landlords. Especially in the case of landlords in higher tax brackets with multiple properties, a private limited company now usually makes more sense than paying 45% (higher income tax band) on rental income.

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Please remember that financial investments may rise or fall and past performance does not guarantee future performance in respect of income or capital growth; you may not get back the amount you invested.

There is no obligation to purchase anything but, if you decide to do so, you are strongly advised to consult a professional adviser before making any investment decisions.

Paul

The author Paul