Buy-to-let:investors return to property market despite stamp duty hikes

Inquiries from potential buy-to-let investors have increased by 30 per cent since May and newly listed rental properties are up by six per cent

Buy-to-let inquiries are up 30 per cent since May, according to a new report from Rightmove.

This comes after a temporary lull in investor activity following the three per cent increase on stamp duty introduced for second home owners in April.

The lull didn't lead to a reduction in the supply of rental homes as some property experts predicted, with new rental listings six per cent higher across the UK than this time last year.

In fact, London has seen a 15 per cent year-on-year increase in available properties, reducing the competition between tenants for the right home. This has led to a slight drop of 1.5 per cent in prices, taking asking rents to an average of £1,985 for a two-bedroom property in London over the past year.

Property experts believe that buy-to-let investors are looking to offset these losses by negotiating on buying prices.

“Investor activity has bounced back following the stamp duty changes, though some agents report that many investors are looking to knock sellers down on their asking prices to make up for the additional stamp duty they now need to pay,” says Rightmove’s head of lettings, Sam Mitchell.

There's good news for investors who rushed to purchase before April's stamp duty changes, with the strongest returns of 13.8 per cent being found in south London's East Croydon, closely followed by west London's Greenford, with 13.4 per cent.

The calculation takes into account an area's capital price growth and average rents since the stamp duty changes.

Outside London, seaside towns are also offering strong returns, including Southend-on-Sea (14.7 per cent), St Leonards-on-Sea (13.7 per cent) and Clacton-on-Sea (12.4 per cent).

“Once again, Essex and other commuter spots are offering investors the best total returns, and those looking at long-term investments are seeking out areas with upcoming improved transport links," says Mitchell.

However, changes to reduce mortgage interest tax relief from 2017 could again see a reduction in investor activity, according to Mitchell.

He warns that as it may take some time for the Government's £1 billion Build to Rent scheme to seriously increase rental stock levels, rents could rise again next year.

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