UK buy-to-let property investor is here to stay

The private rented sector in the UK is now worth £1.4 trillion or equivalent to approximately five-and-a-half times the gold reserves of the US, it is revealed by Savills in its latest report – Residential Property Focus – Issue 1.

This is an interesting observation, as it positions the UK private rented sector among the most valued stocks for investments from the long-term perspective.

The buy-to-let mortgage market in the UK has been witnessing boom since 1996. The sector has witnessed vigorous growth in ROI for the investors in the last two decades. Investors in the London buy-to-let sector, particularly, have remained profitable for over several years. With the house prices hitting the roof in London, working professionals are forced to take up rented accommodation. This has directly contributed to the growth of the buy-to-let sector in the UK real estate market.

Though the government introduced a disincentive (additional stamp duty) to curb acquisition of a second home by property investors, the buy-to-let property market remains stable. Data reveals that more than 63,000 investors paid the additional stamp duty last year to acquire a second home, which is to be let out for rent. They contributed to an increase in the stamp duty receipts by 17 percent in 2016. It is also important to note that a bulk of these investors have not opted for a mortgage. It means that these investors are sitting on adequate cash piles and do not mind paying the additional stamp duty to acquire a second home.

As of now, the residential rentals in London are amongst the highest in the world. It becomes an attractive proposition for investors, especially international investors, to acquire buy-to-let property for rental income. The weakening of the sterling is an added advantage, as it is cheaper than before for international investors to buy a house in London.

Data collated by Savills shows that the private rented new build development pipeline is more than 55,000 (schemes of units or more) in the UK for the next 12 months. While 13,500+ stock will be retained by the developer, 6,700+ units have already been acquired by institutions for private lets. This leaves a huge chunk of 35,000+ units that are available for investors to acquire and bring them into the lettings market.

There are sporadic reports of stagnation in the buy-to-let market in the UK. But research reports point in the opposite direction, as stability remains the common factor. Strawberry Star has several attractive buy-to-let properties for sale, including the brand-new Sky Gardens in Nine Elms in London. If you are interested in knowing more about the ROI and rental income, connect with our estate agents in London.

Source: Savills World Research