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Sharp rise in the proportion of landlords in London buying homes with cash

The proportion of landlords acquiring properties in London in cash hit a seven-year high in 2018, according to fresh data from Hamptons International.

The figures from the Hamptons International Monthly Lettings Index (formerly Countrywide Lettings Index), shows that almost half - 48% - of landlord purchases last year were made in cash, up from 33% in 2017.

However, the jump in the proportion of cash landlord purchases comes against a backdrop of fewer homes being acquired by investors in the capital last year. 

Historically, landlords in London were most likely to use a mortgage to purchase their buy-to-lets, but this changed in 2018. 

More stringent stress testing on buy-to-let mortgages, combined with the tapering of mortgage interest tax relief, has made it more difficult and less appealing for some landlords to get a mortgage, particularly in lower yielding areas where landlords tend to have bigger mortgages. 

Many landlords in the capital who purchased with cash raised the money by re-mortgaging other assets.

Aside from London, Wales was the only other region to record a rise in the proportion of cash landlord purchases.

Across Great Britain, the proportion of cash purchases by landlords dropped from 55% in 2017 to 54% in 2018. 

Scotland saw the biggest fall in cash sales. Here the proportion of buy-to-let homes purchased with cash fell 7% to 47% in 2018.

Last year landlords in the East became the most likely region to use a mortgage, while landlords in northern England however were most likely to buy with cash. 

In 2018, 63% of landlords purchasing properties in the north did so using cash rather than a mortgage.

Cash landlord purchases by region (2018)

Region

% of landlord purchases with cash

% of landlord purchases with a mortgage

1Y Change in % of landlord purchases with cash

London

48%

52%

15%

Wales

57%

43%

2%

North

63%

37%

-1%

Midlands

52%

48%

-2%

East

46%

54%

-4%

South West

57%

43%

-5%

South East

47%

53%

-6%

Scotland

47%

53%

-7%

Great Britain

54%

46%

-1%

Source: Hamptons International

The average cost of a new let in Great Britain rose to £965 per calendar month in February.

Rental growth almost doubled between January and February this year, from 0.6% in January to 1.1% in February. 

London rents drove the increase, rising 2.4% year-on-year. 

Meanwhile, four other regions, the South East (-0.6%), South West (-0.4%), Scotland (-1.2%) and Wales (-0.2%) recorded year-on-year price falls.

Aneisha Beveridge, head of research at Hamptons International, said: “London saw a big rise in the proportion of landlords buying homes with cash in 2018.  This comes against a backdrop of fewer homes purchased by investors in the capital last year.  Meanwhile across Great Britain there was a slight fall in the proportion of homes bought by cash landlords.  

“Much of this cash has come from landlords re-mortgaging to take equity out of homes they already own.  By purchasing with cash, these landlords are avoiding the tax burden associated with the tapering of mortgage interest tax relief.

“Rental growth accelerated in Great Britain in February, spurred on by a 2.4% annual rise in London rents.  Rental growth in London reached the highest level in the last 12 months, meanwhile three other regions recorded rent falls.”

New lets (pcm)

 

Feb-19

Feb-18

YoY

Greater London

£      1,727

 £      1,686

2.4%

    Inner London

£      2,625

 £      2,617

0.3%

    Outer London

£      1,556

 £      1,509

3.1%

South East

 £      1,033

 £      1,039

-0.6%

South West

 £         782

 £         786

-0.4%

East

£         948

 £         926

2.4%

Midlands

£         673

 £         669

0.6%

North

£         626

 £         623

0.4%

Wales

£         650

 £         651

-0.2%

Scotland

£         623

 £         631

-1.2%

Great Britain

£         965

 £         954

1.1%

Great Britain (Excluding London)

£         769

 £         767

0.4%

Source: Hamptons International

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