UK landlords now seeking out more affordable properties with higher yields
The average landlord in the UK property market is now spending less on their property, seeking out the better returns that often come from investing in places where prices are low, but rents are relatively high.
For many years, landlords' portfolios were focused on London and the incredibly high income levels that they could achieve on a monthly basis. However, with the high investment price that also comes with the majority of the capital's property, this leaves returns relatively low.
According to Mortgages for Business, there are now far more landlords doing the maths and buying low value stock that has a higher rental potential. It said that in 2017, and particularly the second quarter of the year, the average buy-to-let mortgage purchase was far lower than the general house price.
The organisation said the reason for this is that the lower value homes prefer far better yields, with landlords who look for student properties and houses in multiple occupancy (HMOs) often able to bring in yields of upwards of ten per cent.
"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," said Steve Olejnik, chief operating officer of Mortgages for Business.
Quarter two also showed a change in how landlords are looking to expand their portfolios. As well as buying cheaper rental stock, Mortgages for Business found that the average UK property landlord has slowed their investment intentions in the past three months, buying fewer homes than they were in the quarter before.