Here is the latest edition of the Property Options’ monthly update on the UK Buy To Let (BTL) market.
This update is by economist Chris Worthington, who was one of the speakers at our recent February PIM.
Some of the key economic indicators in the UK look very positive, employment is at a record high and the FTSE 100 has risen by 14% since the EU referendum.
However the rate of Gross Domestic Product (GDP) growth has slowed to 0.3% in the first quarter of 2017 compared with 0.7% in the first quarter of 2016. If this continues over the whole of 2017 the annual growth in GDP would be less than the 2% growth that might be viewed as the minimum required for a strong economy.
Turning to factors that will have a direct impact on the housing market, inflation is running at an annual 2.3 %, higher than the Bank of England target of 2% – while pay has only increased by 1.9%.
As a result consumer confidence is starting to fall and this is likely to have knock on effect to the affordability of rents for tenants.
House prices have remained fairly steady and while house prices fell slightly in March according to the Nationwide Building Society the annual growth in house prices is currently around 2.6%.
The Buy To Let Market
Rightmove have reported a slower pace of rental growth in 2017, with asking rents up by just 1.8% year on year. This is less than half the rate of increase in the previous year.
Rightmove attribute this partly to a 12% increase in available properties to rent, following the rush to acquire BTL properties before the stamp duty surcharge of 3% was introduced in April 2016.
However according to the Council for Mortgage Lenders (CML) the rush to buy properties is now well and truly over. Around 70,000 BTL mortgages were issued last year compared with 142,000 in the year up to April 2016, a decline of 42%.
The evidence therefore points towards a shift in the BTL market towards lower overall rates of return and a general slowdown in the private rented sector.
How should BTL investors respond to these changes in the market?
First, to maintain profit margins, look for locations and properties where rental yields are still relatively high.
Second, consider re-mortgaging to take advantage of continuing low interest rates.
Third, take a long term view of capital growth and invest in areas where improvements in local infrastructure will pay off in the long term.
Finally come along to the next Property Investment Meeting (PIM) on Thursday 25 May to find out how minimise your tax liability!
Our next PIM is on Thursday 25 May 2017 at Holiday Inn, Bristol City Centre, 6-9 pm.
We hope you will join us then.
For more info and to reserve your place Click Below