Decline in Average Investment Property Price

Landlords are looking to bag a bargain with investment properties, as the average property purchase price sees a decline.

New analysis from Mortgages for Business found that landlords are increasingly looking towards purchasing cheaper properties with higher yields. The lender’s Complex Buy to Let Index conducted an analysis of mortgages in the second quarter of 2017. It discovered that all types of buy to let properties purchased during the period had lower values than anticipated.

However, the lower valued properties are a bonus for landlords and investors, who are seeing better returns as a result of the price decline. Both Houses of Multiple Occupation (HMOs) and multi-unit purchases are earning investors excellent average yields of over 10 per cent.

Despite lower prices, there has been a drop in landlord investment. Investors have scaled back the rate at which they expand their portfolios in comparison to the previous quarter, with the second quarter of the year seeing a decline in the proportion of buy to let purchase transactions compared to the first quarter. This is likely fuelled by factors such as the relatively new stamp duty surcharge, which has warned many small-scale landlords away from the sector.

It was only semi commercial properties which saw an increase in purchase activity. Purchases now comprise 67 per cent of quarterly activity for the property type, a significant increase upon previous findings.

Chief operating officer of Mortgages for Business, Steve Olejnik, commented on the findings: ‘Landlords have been selective with their purchases this quarter, choosing properties that maximise their income with minimal investment. This strategy is likely to remain common as it allows landlords to maintain profitability while HMRC phases in restrictions on income tax relief for landlords.’

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