Death of buy to let has been greatly exaggerated, new figures show
Predictions that landlords are not buying properties to let out because of tougher rental taxes and regulations appear to be short of the mark according to new mortgage data.
Statistics for December from UK Finance, the mortgage lenders’ trade body, suggest that there were 5,700 new buy to let home purchase mortgages completed in December – that’s 3.6 per cent more than this time last year.
There was also a small rise in first time buyer mortgages completed in December – 29,490 which was 0.3 per cent up on the same month a year earlier.
There were also 29,400 ‘home mover’ mortgages completed in December 2019, 3.2 per cent more than in December 2018.
“These figures reflect what was happening in the months leading up to the election so only show a more solid resilience in activity in what was still quite a turbulent period” notes Jeremy Leaf, north London estate agent and a former RICS residential chairman.
But he adds: “Of just as much interest is the strong increase in buy to let home purchases, which we also noticed on the ground as aspiring first-time buyers squeezed by strict lending criteria continued to rent. This has encouraged more landlords to expand their portfolios or join the sector.”
And Mike Scott, chief property analyst at online agency Yopa, says: “It takes a long time for an increase in buyer interest to feed through into mortgage completions … so this December figure demonstrates that the upturn in market activity must have started much earlier in the year.”
Cash is king – but does it really mean lower sale prices?
A new study suggests cash buyers secure lower sale prices than mortgaged purchasers – but is that really the case?
The survey by comparison site GetAgent looked at the average price paid by cash buyers over the last 12 months and compared it to buyers with mortgages.
The data shows that across the UK the average paid by cash buyers over the last year was £220,100 – nine per cent cheaper than the average paid by buyers with a mortgage, £240,758.
“Cash buyers are preferable to many sellers because they provide a much simpler transaction with fewer hoops to jump through and often come without a complicated chain. The flip side of this convenience is that cash buyers have a far stronger position when it comes to negotiations and often sellers will accept a more sizeable reduction for the speed and convenience of a cash sale” says GetAgent founder and chief executive Colby Short.
However, what isn’t clear from the research is whether the homes bought with cash were smaller or in less desirable locations – thus contributing to the lower price.
Downsizers, for example, typically make cash purchases of smaller homes using the proceeds from the sale of larger properties; younger buyers seek larger and dearer properties as their families grow and statistically are more likely to have mortgages.
Colby says cash has become more significant in recent years for a variety of reasons.
“Brexit uncertainty left many on the fence and so those looking to sell have had to do so with a lower price expectation due to a dwindling level of buyer interest. Therefore, finding the golden ticket of a cash buyer with honest intentions in a market slowdown has prompted an even greater tendency to sell with a greater cash discount in order to get a sale over the line” he believes.
“At the other end of the transaction scale, the continued affordability of borrowing money due to low interest rates has seen many aspirational buyers commit to a greater sum than they may have otherwise.”
In the GetAgent analysis, the gap between cash and mortgaged purchases was highest in the North East and North West, where properties bought with cash go for 12 per cent less, while London is the only region where cash will cost you more – six per cent more than the average price paid by a mortgage buyer.