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Growing wealth in the BTL sector ‘fuelling cash purchases’

The proportion of buy-to-let landlords acquiring property in cash increased to 61% in January, the highest level since records began a decade ago, according to Countrywide.

Buy-to-let investors who have opted to acquire property since the introduction of the 3% stamp duty surcharge last April have relied more heavily than ever on cash to fund their investments, the estate agency group claims.

Countrywide says that over the last decade, the proportion of landlords purchasing property with 100% cash has steadily increased from 41% of landlords in 2007 to 61% today.

Landlords purchasing properties in the North of England are most likely to use cash to fund their purchase, reflecting the fact that the least expensive homes are most likely to be bought with cash, according to Countrywide.

The company report that 70% of buy-to-let acquisitions in the region are in cash, a larger proportion than anywhere else.

Over the last year almost two thirds of homes costing less than £125,000 were paid for in cash. 

In stark contrast, Landlords in London, where properties are typically most expensive in this country, are more likely to use mortgage finance to invest in property.

Johnny Morris, research director at Countrywide, said: “On average landlords sell a home once every 17 years meaning as prices have increased, a significant amount of wealth has built up in the sector. This is now fuelling cash purchases. With the forthcoming tapering of tax relief on mortgage interest payment, landlords have less of an incentive to borrow, suggesting more cash activity in 2017.

“Rents are rising at twice the pace of last January and there are signs that rental growth is starting to pick up in much of the country.  Ten months after the introduction of the stamp duty surcharge the number of homes on the rental market is showing signs of coming down.  If this fall continues over the next few months, it is likely to support rental price growth.”