London house prices: Buy-to-let investors looking outside the capital for best value as Brewin Dolphin warns sector is a “disaster waiting to happen”
A rising number of buy-to-let investors are trying to get their hands on cheaper properties outside of London and the South East, new figures reveal today.
Meanwhile, one London investment manager has warned BTL is a “disaster waiting to happen” due to a lack of understanding on recent changes in the tax rules.
Figures released by the Mortgage Advice Bureau, a broker, today show 70 per cent of buy to let investors looking for a mortgage in the three months to September would looking to buy a property below £250,000. During the same period last year only 53 per cent were.
A year ago, 44 per cent of landlords were searching for mortgages on properties priced between £250,000 and £499,999. This proportion has fallen sharply over the past 12 months, down to just a 25 per cent.
Brian Murphy, head of lending at Mortgage Advice Bureau, said:
In recent months we have seen a surge of buy-to-let landlords looking for mortgages on lower priced properties. As rental demand remains strong nationwide, opting for a cheaper property can result in more attractive yields. It appears many landlords are looking to invest in areas outside the South of England, where property prices won’t hold them back from making a profit.
Brewin Dolphin yesterday warned that thousands of buy-to-let investors are in danger of seeing profitable investments turn to loss making ones.
A survey from YouGov commission by Brewin Dolphin showed 82 per cent of BTL investors said chancellor George Osborne’s tax changes announced in the summer budget do not concern them. Around 91 per cent said BTL was still a good investment and 81 per cent think property prices will increase in their favour.
“Landlords are finding it hard to get to grips with the fact that they will be prevented from deducting mortgage interest, which is an expense, from their profits, and will instead be given a 20 per cent tax credit on their eventual tax bill,” said Rob Burgeman, divisional director at Brewin Dolphin.
“For higher-rate taxpayers this means effectively paying tax on mortgage interest– in addition to the interest itself. For many people, this just doesn’t make sense. The death of the buy-to-let investor may be going too far, but the balance has certainly tipped in favour of wealthier investors who do not need a mortgage.”