Unsurprisingly, many landlords have become unsettled in recent months by news of a ‘crackdown on buy-to-let’ in the form of higher taxes for property investors. However, experience tells us that quite often, behind every challenge hides an opportunity.
One of my favourite investment quotes comes from Warren Buffett, arguably the world’s most successful investor. The multi-billionaire credits much of his success to being “fearful when others are greedy, and greedy when others are fearful.”
It is certainly true that some would-be-investors are now fearful. Interest in buy-to-let dropped by 27% during March, compared to the same month last year, as tax changes were introduced on April 1st and it seems very likely that, in the short-term at least, landlord purchases will be reduced.
Meanwhile, robust tenant demand remains, rents continue to rise and lenders appear to have sparked a price war on buy-to-let loan rates.
Figures from Rightmove.co.uk (April) confirm that the average rental in the West Midlands region has increased by 0.7% to £651, during the first quarter of 2016. An analysis of available homes to rent in Evesham puts the town’s current average rental at £675pcm, while rents in Pershore now average £775pcm (Home.co.uk – Apr16).
Following a rush for many investors to buy before the end of March, lenders now appear to be competing to tempt aspiring landlords with some very low mortgage rates. According to financial data company Moneyfacts, the average rates for five year BTL mortgages have fallen to a record low of around 4%, while some two year fixed deals have fallen to 3.32%.
Whilst some buy-to-let investors will be scared away from the sector by new pressures, the savvy landlord will be carefully reviewing their portfolio and identifying opportunities to improve returns. I regularly meet landlords, who have previously invested elsewhere but have now recognised that Evesham can offer stronger income yields than some nearby towns.
There may also be an opportunity for landlords to review rents being paid on existing investment properties to ensure that they are kept in line with the market.
During the summer, I would expect to see landlords take into account recent tax changes when buying, resulting in a natural adjustment in the market for typical buy-to-let properties.
If you’d like to discuss buy-to-let in Evesham, Pershore or the surrounding areas, please get in touch. No hard sell, just a free coffee and a no obligation chat!