Buy-To-Let Bounces Back in Q3 2016

Richard Carr reports on new figures which suggest that during the third quarter of 2016, British buy-to-let sector activity significant improvement on the quarter before, as buyers return in droves.

Limiting expansion

The buy-to-let sector is popular with investors, especially domestically. Figures indicate that one out of every five residential properties were owned by private landlords in 2014, with this number expected to rise to one in three by 2032. A booming buy-to-let market has exacerbated the UK’s housing shortage problem, so high demand has pushed residential prices and rents to new heights.

Whitehall is trying to limit buy-to-let expansion, by implementing measures to raise operating costs for landlords. In April 2016, a new 3% stamp duty tax on buy-to-let and second homes came into effect, initially limiting activity. It appears the buy-to-let market is bouncing back. For instance, according to Rightmove the total number of houses available to rent climbed by 6% during Q3 of this year.

Rebounding activity

This trend was confirmed recently by HM Revenue and Customs (HMRC). Industry portal Property Wire reports that new figures from the governmental tax agency indicate that during the third quarter of 2016, one in four UK residential real estate sales were either buy-to-lets or for second homes.

HMRCs data sheds more light on the stamp duty rise. Since the surcharge was rolled out, it has collected around £670m in fees, for 235,000 UK houses. Just 56,100 properties were liable for the surcharge, generating £440m in additional revenue. The amount of additional homes bought in the second quarter of 2016 dipped from the quarter before, but doubled during the three months after.

Also, statistics from the UK Land Registry suggest that in September, 95,300 residential and commercial real estate sales were registered in England and Wales. The most popular categories were terraced (26,050), semi-detached (24,615), detached (22,763) and flats/maisonettes (19,457). Also in September, 70,237 property sales were freehold and 11,497 involved new builds. Meanwhile, in this timeframe, 552 units worth more than £1m were sold, 313 of which were in our nation’s capital.

Robust investor returns

Investor belief in the UK’s buy-to-let sector is so strong, that even the stamp duty surcharge could not dent demand for long. This may be because investors can potentially earn high capital and rental returns from buy-to-let. According to Rightmove, UK rents increased by 0.5% during the third quarter of this year. Meanwhile, data from the Office For National Statistics indicates that UK house price growth expanded during August 2016. These developments come despite the UK’s recent decision to leave the EU, showing investors that buy-to-let can potentially serve as a stable investment option.

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