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."

Join our mailing list:

Leave a comment



Latest Comments

ChristinaReedUK
ChristinaReedUK 20 Jun 2016

I don't understand why it's always a war between the two sides. Either, way the landlord is probably keeping a detailed inventory and will see the changes you've made. I just don't understand why there...

view article
NathanGreen
NathanGreen 16 Jun 2016

Seeing that the tenants are quite satisfied with their landlords and the properties is indeed great. I wonder, though, what is the situation in London alone? The tenants face sky-high rent levels in the...

view article
AndiMur
AndiMur 15 Jun 2016

TheGuardian published the same forecast. But on the other hand, professional brokers express different opinions. According totranio.com, an exit from the EU would not affect the demand/supply imbalance...

view article
Gary Holmes
Gary Holmes 14 Jun 2016

Having a professionally completed inventory at check-in and check-out is clearly (to me at least) of minor value. Tenants make un-authorised modifications and/or walk off with items that belong to the

view article
Violet Gibson
Violet Gibson 14 Jun 2016

Cautious people think buying off-plan is reckless, but over the past few years investors have literally made fortunes.Pre-release prices have obvious benefits for the developer, who gets instant finance...

view article
Kate Windleton
Kate Windleton 14 Jun 2016

An interesting research indeed. I guess that is in complete contrast with the United States where people often move from one coast to another. It will be interesting to hear the trends for people moving...

view article
NathanGreen
NathanGreen 14 Jun 2016

I think it all depends on the market conditions and how well your company is doing. You will agree that you can't demand more when you're killing yourself just to hang in there. Sometimes you need all

view article
ChristinaReedUK
ChristinaReedUK 13 Jun 2016

What does "detecting a bad vibe" mean actually. I've had certain vibes like these and yet have always found a reason , if there's any, why I don't like a certain property. The property maintenance might...

view article
keybanks estates
keybanks estates 08 Jun 2016

Great News for first time buyers, about time two!

view article
NathanGreen
NathanGreen 07 Jun 2016

I agree with #6 - you should maintain your garden according to the target buyer. One thing is universal, though - cleanliness and order. Having the yard clutter-free and clean will help people who do enjoy...

view article
NathanGreen
NathanGreen 06 Jun 2016

I will always say that London is overrated. Sure it is the capital, but it's too stuffed in there. It's more of a business city to me.

view article
Paul
Paul 25 May 2016

Estate agents are pathetic when it comes to fees. They have this 'I had to do it at 1% because that's what the others were quoting' mentality. We are the most expensive agents in our area, charging double...

view article

Related stories

More articles from Hero