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Buy-to-let investing to ‘fall most dramatically’ - Savills

The number of properties acquired by buy-to-let investors using a mortgage will plummet by more than a quarter over the next five years, according to Savills.

The estate agent forecasts that the number of mortgaged buy-to-let investors will ‘fall most dramatically’ by 27% from the exiting 75,000 a year to just 55,000 by the end of 2022 as tighter mortgage regulations, increased stamp duty charges and the phasing out of mortgage interest relief combine to restrict buy-to-let investor activity. 

But while the phasing out of mortgage interest relief will deter many investors looking to take out a mortgage, Savills predicts that purchases by cash buyers will rise by 6%, with many investors increasingly looking to areas in northern England, where yields are typically higher.

“We have seen the earliest signs that some mortgaged buy to let investors may be selling stock,” said Lucian Cook, Savills head of residential research.

“Those entering the market will be looking very carefully at yields and that will put the spotlight on urban markets outside the capital,” he added.

As far as rental values are concerned, Savills predict that rents will rise in line with incomes, with rental growth likely to exceed house price growth in London. 

The market in the capital has had to accommodate a glut of stock after investors scrambled to buy before the 3% stamp duty surcharge on additional homes came into effect on 1 April 2016. Asking rents fell 3.2% in the year to June 2017, compared to a 1.9% rise across England and Wales. 

Rents in London have now stabilised. Compound growth of 17% is projected from 2018-2022, in line with wage growth but ahead of inflation.

Withdrawal of mortgage interest tax relief will push investors from London to higher yielding regional locations. Increased rental supply there will dampen potential rental growth beyond the capital.

Lawrence Bowles, Savills research analyst, said: “The rental outlook is strongest in regional cities that attract employees from high value sectors such as professional services, technology, and finance.”

Forecasts for mainstream rents:

2017

2018

2019

2020

2021

2022

5 year

2018-2022

UK

0.0%

2.5%

2.5%

3.0%

3.5%

3.5%

15.5%

London

-3.0%

3.0%

3.0%

3.5%

3.5%

3.0%

17.0%

UK excl London

2.0%

2.0%

2.0%

3.0%

3.5%

3.5%

15.0%

Wages

2.0%

3.0%

3.0%

3.0%

3.5%

3.5%

17.0%

CPI

3.0%

2.0%

1.5%

2.0%

2.0%

2.0%

9.5%

Source: Savills research, Oxford Economics

  • icon

    I have been a scientist all my life and thought I could understand just about any sort of data.

    What on earth does the data here mean? I can read it and the figures are percents. It might be useful data but it would be common politeness and common sense to display it properly.

  • icon

    Saville's attempting to prove they are the market voice, when this article is about 6 months old. There are a number of reasons why investors do not need to be too downhearted. 1) Yields in the north far outweigh those in the south, so move your money. 2) How much interest are they getting in banks? 3) There are plenty of lenders out there who can service the need of a property investor. 4) Paying tax is a good thing and shouldn't be avoided:)

  • cantseethewood forthetrees

    It doesn't take a genius to work out that the spaces between columns have accidentally gone AWOL (no doubt an unintended consequence of uploading the content and making it live).
    It's just a forecast for likely increases in rents in the UK, London, and UK excl London; and then giving the likely increases in Wages and CPI over the following years: 2017, 2018, 2019, 2020, 2021, 2022, with a final column covering '5 year 2018-2022'. Simply put the spaces back in when you read it and it is very useful info - many thanks for giving us this info.

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