Data collected by UK Finance has cast a very interesting light on the UK buy to let market. It will come as no surprise to learn that buy to let investment is down across the board after the UK government introduced various tax changes. When you also consider uncertainty surrounding Brexit it is perhaps no surprise to learn that buy to let landlords are holding off. However, is London suffering more than any other area of the UK?
Buy to let investment down 50% in London
Recent mortgage data shows there were just 1126 mortgage agreements connected to buy to let landlords in London during the first quarter of 2017. This is down from an average of 2500 in both 2014 and 2015 which highlights the challenges facing UK property investors. One area which seems to be benefiting from London’s woes is Manchester where there were 840 buy to let mortgages over the same period against an average of 1000 in 2014 and 2015.
While Manchester appears to be grabbing the lion’s share of buy to let investment across the UK there are other areas which are also benefiting. However, Manchester has specific characteristics which appear to be working in favour of buy to let investors.
Investing in Manchester
For many years now Manchester has been changing with new residential developments popping up right across the region. Those who follow the area will be well aware there is a large and growing student population and the BBC recently moved its head office to Salford, on the outskirts of Manchester. These are just two reasons why buy to let investors seem to be attracted to Manchester as well as the attractive rental yields compared to London.
Manchester, Liverpool and Birmingham are just three examples of cities which have benefited from the demise in London property investment. It will be interesting to see what happens in light of Brexit because at the moment everyone seems to be talking about a doomsday scenario and loss of tens of thousands of financial jobs in London. Is this really a turning point for London or just another bump in the road which is the long term success story of the capital?
Are investors looking further afield?
It would appear that buy to let landlords are now beginning to focus more upon rental yields, with double-digit yields available in some cities in the north, as opposed to capital growth. That is not to say the capital growth should not be part of your long-term investment policy but if the rental yield more than covers your costs and leaves a little excess then surely this must be a relatively safe long-term investment strategy?
Buy to let landlords have been the victim of unfair recriminations with the political elite using them as a scapegoat to increase taxes. Politicians may have short memories, doing what they can to attract votes, but how will buy to let investors feel in the future when inevitably the government of the day come cap in hand looking for private equity?
Have they forgotten the UK is currently running a new build deficit in the tens of thousands? Are they ignoring their current budget woes which leave little in the way of direct investment in new build properties? Buy to let landlords may have been made a scapegoat in the short term but inevitably it will be the government (or should we say the tax payer?) which will pay in the longer term.