Is Buy to Let still an attractive investment?

Is Buy to Let still an attractive investment?

Following an analysis of the market, Private Finance believes that although buy to let remains an attractive investment in the immediate future, it also warned that accessing finance will now be the biggest challenge for amateur landlords in the new market landscape.

Private Finance’s analysis takes several key factors into account including the reduction in higher rate tax relief, the stamp duty increase and the outlook for house prices and yields. The broker has also considered the impact of the European Mortgage Credit Derivative (MCD) and concluded that whilst these factors may have a negative impact, they are unlikely to dampen the market altogether.  

Private Finance has applied its model to a typical buy to let situation in a typical commuter town. Its findings demonstrate that a potential 62% return on capital could be achievable, if the investment is held for a term of at least five years utilising a fixed rate mortgage at 3.6% for the duration which is currently available in today’s market.

Whilst a number of commentators have suggested that annual capital appreciation of as much as 5% is achievable in areas such as this, Simon Checkley, Managing Director of Private Finance has said that a buy to let still remains viable at a lower rate of appreciation.


Checkley says:"Of course, these figures assume the full extent of the tax relief reduction and stamp duty hike so the short term returns could look more attractive if you are able to take immediate action and complete a purchase before 1 April 2016 when the increased stamp duty will apply.

We are not underestimating the impact of the loss of higher rate tax relief or the increase in stamp duty on the market. What we are saying is that they are not necessarily 'deal breakers'. Of course, there have been many protestations in recent weeks from concerned landlords as a result of the planned tax changes. What is less commonly recognised is that there are still opportunities in this market if an investor makes a sound purchase subject to other underlying economic factors.

Understandably, many landlords are claiming they will lose considerable sums of money as a result of these changes. However this does beg the question of the true viability of their original investment.’

Checkley added: "With regards to house prices versus yields, it can be difficult to make things work in London because house prices are such that yields remain relatively low. This obviously affects the amount of mortgage you can obtain and therefore the attractiveness of buy to let as a whole. However, a number of commuter towns by contrast are offering both the potential for capital growth as well as decent yields."

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Latest Comments

Kelvin Lloyd
Kelvin Lloyd 09 Oct 2017

IT is up, to the Planners. If they will only give permission for bungalows on certain (suitable) sites, they will be built.

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maggie swift
maggie swift 09 Oct 2017

It's just the beginning of the shocking rise.

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maggie swift
maggie swift 09 Oct 2017

I have recently read that the bungalows can provide social housing for elderly residents in London.

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zoe glover
zoe glover 05 Oct 2017

Update! Worst company I have ever dealt with. Undervalued a Cambridge property by over 100k, wont take on any evidence of valuation including a RICS valuation done 3 years ago for the very same value...

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Paul Edwards
Paul Edwards 27 Sep 2017

Its nonsense articles such as this that make it harder to get clients to realise just how difficult the market is out there. When you see Rightmove and there are more 'price reduced' then 'new' most days...

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Tom Allen
Tom Allen 20 Sep 2017

Absolutely agree with you!

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RyanGeo
RyanGeo 18 Sep 2017

A sharp correction would be a less dramatic expression to use. That is already underway in certain sectors in Reading where I practice as Chartered Surveyor

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sean benton
sean benton 01 Sep 2017

Identity theft is a thread for any profession. So,people should stay alarmed. I once take help from a letting agent and came to know that letting agents are taking every precaution to prevent fraudulent...

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Mark N.
Mark N. 30 Aug 2017

We have seen a surge in instructions over August and that should continue into September too.

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Chris
Chris 30 Aug 2017

Unfortunately, all the legislation bears its force on Landlords and ignores, naively, the effect of Rogue Tenants on the ability of landlords to keep houses in repair and offer properties for rent at reasonable...

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Christian Donovan
Christian Donovan 18 Aug 2017

The write-down on house values, combined with the fall in the GBP saddled the fund?s property portfolio with a 1.4% loss in the second quarter. The shocking amount of $240 million.

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Samantha Goodman
Samantha Goodman 11 Aug 2017

Interesting point of view.

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