Buy-to-let bounces back after post-stamp duty lull

Wednesday 12th October 2016

Activity in the buy-to-let sector increased substantially during the third quarter of the year, according to the latest findings from Rightmove.
The property portal reports that enquiries from landlords and property investors have risen by 30% since May. 
The boost in activity and enquiries is regarded as the expected result after a slower period immediately following the introduction of a 3% stamp duty surcharge on the purchase of rental properties in April.
Supply of rental properties remains strong, meanwhile, with the number of newly-marketed homes to let up 6% last quarter when compared to 2015. 
London leads the way for new supply, boasting a 15% year-on-year increase in the supply of rental homes over the same period. 
The average asking rent has increased over the last three months, too, up by 0.5% to £779 per month. 
While the East of England still leads the way for the highest annual increase, it’s the North West that has experienced the highest rise over the last quarter, up 2.0%, followed by Scotland, up 1.5%. 
London continues its downwards trend, staying under £2,000 per month and annually down 1.5%.
"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," says Sam Mitchell, Rightmove's head of lettings.
"New rental supply has held up despite concerns that the stamp duty changes would lead to less fresh stock.”
Rightmove reveals that some of the highest average rental returns for landlords can be found in seaside locations. 
Southend-on-Sea, St Leonards-on-Sea, Clacton-on-Sea and Westcliff-on-Sea all have average rental yields of over 11.5%.
Other high performing areas are Northampton locations Corby (12.8%) and Wellingborough (11.8%) as well as East Croydon (13.8%) and Greenford (13.4%) in the capital.
“Once again 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," adds Mitchell.
He says that next year's changes to the way landlords can claim buy-to-let mortgage interest tax relief are likely to force some landlords to review their operations but that there is no sign yet of investors exiting the market.
"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." 

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