Why 2015 Could Be a Great Year for Buy-to-Let
According to a recent survey by Platinum Property Partners 43% of existing landlords plan to expand their portfolio in 2015. The most ambitious landlords are those who own Houses in Multiple Occupation; 52% of whom plan to add to their portfolio this year. These statistics are a reflection of the evolving housing market as a whole; as young generations cannot afford to buy property they look to affordable rental property including shared houses.
A mixture of factors including legislation changes and property price trends are forming a positive outlook for investors in this new year. Here are our six main reasons why now is the time to invest:
Stamp Duty Changes
Stamp duty has been overhauled from the old graded system where tax jumped considerably at each price threshold to a graduated system which will be more budget-friendly. For those buying a property worth less than £937,000 which is 98% of buyers, stamp duty will most likely be at a rate of around 5% as the national average house price is £188,000 (Jan 2015).
According to figures from the Council of Mortgage Lenders the average price of a buy-to-let property is £200,000 which means that landlords will make an average stamp duty saving of £500. This is attractive to buy-to-let landlords who will be looking to save money where they can. This extra cash could be re-invested in refurbishments which could help to raise the rental value and capital value of the property.
The Pension Reform
The pension reform, which will come into effect at the start of the new financial year, means that people over the age of 55 have the right to withdraw several tax-reduced lump sums from their pension. This means that even if you are aged 55 or more and still working you can still draw out of your pension and invest this to create more income.
With house prices predicted to grow at 6% per year for the foreseeable future people are looking to spend their pensions on reliable investments that can provide both long term returns and regular income. According to research by the Direct Line for Business 32% of people aged 45 to 64 with a pension would consider using some or all of their pension pot to fund a buy to let property.
House Prices Should Still Increase
So far 2015’s house prices have been described as “stagnant” but in most regions they are not in decline. According to RightMove property prices are still predicted to grow 5-6% across the whole year so these early months may be a chance to snap up a good deal.
Savills Estate agents who have produced a property price forecast, predict that the South East and East Anglia will have the biggest house price appreciation over the next five years. House prices in the South East are predicted to rise by 26% and in East Anglia by 25%.
Government Investment in New Homes
According to the Centre for Housing and planning research at Cambridge University the population of the country will rise 20% between 2011 and 2031 giving a demand for 250,000 new homes every year.
Developers in the UK are currently building about 100,000 homes a year which is not enough to sustain the expanding population the government has decided to invest in new homes. The government recently took matters into their own hands and plan to turn the disused RAF base in Northstowe into a new town with 10,000 houses. Around a third of the properties in Northstowe are thought to be available for but-to-let investors.
Availability of Mortgage Products
Buy-to-let is becoming a more viable option for more people because of the range of mortgage products tailored specifically for property investment. According to the National Landlord’s Association £21.8 billion was paid in mortgage repayments buy landlords in 2014 and this level lending is expected to be similar in 2015.
Banks, building societies and private companies alike have jumped on the buy-to-let bandwagon. People now have access to products such as 3 year trackers and 5 year fixed rates which are currently averaging about 4.9% APR. Then there’s some all-singing all-dancing mortgage deals like the news 10 year fixed-rate product from The Mortgage works and a combined Buy-to-Let mortgage and renovation loan from Shawbrook.
Demand for Rental Property
The current demand for privately rented property is enormous with an estimated seven tenants chasing every one property. Such high demand means is there is much lower risk of having an empty property for a long time. In Cambridgeshire, averagely priced property is letting within record time, which means that these landlords are benefitting from no void period and increased pre tax profit.
High demand for rental properties also means landlords can be more competitive with rent rates and according to Reeds Reins rents rose 3% on average across the UK last year. The East of England saw the strongest hike in rents over 2014, with the average rent increasing by 7.6% annually to reach £771. The East Midlands and also seen strong increases with average rents increasing by 6.2% year on year.
All in all, despite scares that mortgage interest rates will rise and property prices will fall, 2015 doesn’t look too bad for buy-to-let or even renting out a property you already have. According to the figures above if you want to invest anywhere it should be in the East Midlands and South East because property prices are unlikely to fall, demand is sky high and rent rates should comfortably cover your mortgage and more.
If you want to know about maximising the return on your investment property then talk to Belvoir today. We can advise on the whole buy to let process including how to convert properties to multi-lets, how to save money and attract the right tenants. Belvoir offer free one-to-one advice appointments, search and select sessions and free property workshops.