Cash is King for London and Northern Property Investment

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The proportion of buy to let investors purchasing investment property in London with cash rose from 33 per cent in 2017 to 48 per cent in 2018 – a 15 per cent increase, the highest in seven years.

Meanwhile, buy to let landlords in Northern England remained the most likely to purchase with cash, with 63 per cent making cash purchases in 2018.

The latest Hamptons International Monthly Lettings Index showed that cash landlord purchases actually fell from 55 per cent in 2017 to 54 per cent in 2018. Only Wales and London recorded a rise. In Scotland the proportion of buy to let homes purchased with cash fell (-7 per cent) to 47 per cent in 2018.

Harsher stress testing on buy to let mortgages, plus the tapering of mortgage interest tax relief, has made it more difficult and less appealing for landlords to get a mortgage, particularly true in lower yield areas such as London where landlords tend to have bigger mortgages. As a result, in 2018 a higher proportion of landlords in the capital purchased with cash, often raising the money by re-mortgaging other assets.

Head of Research at Hamptons International, Aneisha Beveridge, said, ‘London experienced a big rise in the proportion of landlords buying homes with cash in 2018. This comes against a backdrop of fewer homes purchased by investors in the capital last year. Meanwhile, across Great Britain there was a slight fall in the proportion of homes bought by cash landlords.’

She continued: ‘Much of this cash has come from landlords re-mortgaging to take equity out of homes they already own. By purchasing with cash, these landlords are avoiding the tax burden associated with the tapering of mortgage interest tax relief.

The average cost of a new let in the UK rose to £965 pcm in February. Rental growth nearly doubled between January and February, from 0.6 per cent in January to 1.1 per cent in February. London rents drove the increase, rising 2.4 per cent year-on-year. Meanwhile four other regions, the South East (-0.6 per cent), South West (-0.4 per cent), Scotland (-1.2 per cent) and Wales (-0.2 per cent) recorded year-on-year price falls.

Beveridge added: ‘Rental growth accelerated in Great Britain in February, spurred on by a 2.4 per cent annual rise in London rents. Rental growth in London reached the highest level in the last 12 months, meanwhile three other regions recorded rent falls.’

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