Buy to let landlords and new investors are returning to the UK market after stamp duty change earlier this year with enquiries up 30% since May, the latest data shows.
The tracker report from Rightmove describes it as ‘a substantial’ boost to the buy to let market following a short term dip when the 3% stamp duty surcharge on additional homes was introduced in April 2016.
March and April saw a temporary lull in buy to let activity on Rightmove, following the rush in the first three months of the year to complete before the new rules kicked in. However, the brief pause in activity didn’t lead to a reduction in new rental supply that some were predicting, with newly marketed rental properties up 6% in the third quarter of 2016 compared to 2015.
The data also shows that London continues to lead the way for new supply, with a year on year increase of 15% over the same period while the top total returns were in East Croydon at 13.8% and Greenford at 13.4%.
‘Investor activity has bounced back following the stamp duty changes, though some agents report that many investors are looking to knock sellers down on their asking prices to make up for the additional stamp duty they now need to pay,’ said Rightmove’s head of lettings Sam Mitchell.
‘New rental supply has held up despite concerns that the stamp duty changes would lead to less fresh stock,’ he added.
The figures reveal that asking rents are up slightly this quarter with a rise of 0.5% to £779 per month. But asking rents are continuing to fall in London with a 0.7% decline quarter on quarter and down 1.5% year on year.
Whilst the East of England still leads the way for the highest increase annually, it’s the North West that has risen most this quarter, up 2%, followed by Scotland, up 1.5%.
The report also identifies the locations where buy to let investors have seen the highest overall return on their investment. The top 10 outside London suggest seaside towns are proving to be a good investment. These include Southend-on-Sea with growth of 14.7%, St Leonards-on-Sea up 13.7%, Clacton-on-Sea up 12.4% and Westcliff-on-Sea up 11.8%.
Corby and Wellingborough, both in Northamptonshire, also make the top 10 with total returns of 12.8% and 11.8% respectively. Although yields are often lower in London, the increase in capital has led to total returns as high as 13.8% in East Croydon, and 13.4% in Greenford.
‘Essex and other commuter spots are offering investors the best total returns, and those looking at long term investments are seeking out areas with upcoming improved transport links,’ Mitchell explained.
‘The changes starting in 2017 to lessen mortgage interest tax relief may see some seriously review their businesses and could scale back, though there appear to be no signs yet of landlords exiting the market,’ he pointed out.
‘If supply of property to rent does scale back those that will win in the long term will be less highly-mortgaged landlords that chose not to sell off their property, and the big winners could be those that are investing in the right areas now,’ he added.
‘We expect some of the supply gap to be filled by Build to Rent but it could take some years for this to seriously increase rental stock levels. With this in mind 2017 could be another year of increasing rents,’ he concluded.