London Investors Flocking To The Commuter Belt
London is becoming too hot to handle for some property investors, and the fear of the bubble bursting has driven some landlords to sell up and move out of the capital to the commuter belt.
Some three-and-four bedroom properties in London have already broken the £2,000pcm barrier, and the average for all properties is set to reach £2,000 by 2020.
Rents this good should be exciting for London landlords, but the implementation of new tax credits means that low yields could wipe out landlords’ profits by 2020.
The risk means that landlords can consolidate their business by funding cheaper properties in the commuter belt.
70pc of mortgage enquiries from landlords since September were for properties under £250,000 – only 53pc made similar enquiries last year.*
Meanwhile, mortgage searches for properties up to £500,000 have fallen from 44pc of the total last year, to just 25pc in 2015.
The attraction to cheaper properties is much higher yields than can be achieved in the capital, meaning landlords will be less likely to suffer the losses that London properties will incur once the tax changes are in full flow.
Landlords at opposite ends of the spectrum will be hit hardest by the new tax changes – namely properties with low yields (including London and very small towns with low-paying jobs).
Martin & Co have recently published a market intelligence report that calculates that properties in commuter regions can reach 5.8pc for a four-bedroom house. A similar property in London Underground zones reaches a yield of 3.5pc.
However, this doesn’t mean landlords are overly perturbed by the changes. A Yougov survey says 91pc of landlords say that buy-to-let is still a good investment, and 81pc said property prices will increase in their favour.
Our own research also supports this. We surveyed nearly 4,000 landlords and 40pc said they planned on expanding their portfolios, nor has this thought-process been altered by news of the tax changes.
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