Birmingham has been crowned the UK’s premier buy-to-let hotspot outside London, after a recent boom in activity in the city’s rental property market. According to data from the Council of Mortgage Lenders (CML), Birmingham comes second only to the Capital in terms of recent buy-to-let property purchases.
Last year, Birmingham only took seventh place on the list. It is believed that the leap into second place is at least partly down to an increase in demand for rental properties brought about by the new HS2 line providing high-speed rail travel to and from London. The surge in Birmingham’s buy-to-let activity also takes place against a backdrop of general growth in the UK’s buy-to-let market, with activity nationwide showing year-on-year growth of over a fifth. This continues a trend of increasing interest in buy-to-let properties over the past few years, driven by poor returns on savings accounts encouraging more people to look at alternative ways to grow their money.
According to an analysis of recent data by Barclays Mortgages, although rents in the South East tend to be higher, less affordable purchase prices tend to squeeze the returns they represent in real terms. Barclays gathered the data it used to reach these conclusions after looking at more than 5,000 customers who purchased a property with one of the firm’s buy-to-let mortgages this year or last year. Barclays also commissioned further research among some 500 owners of buy-to-let properties, and revealed some interesting information about the kind of investors who are currently active in the UK’s property rentals market. For example, it emerged that over three quarters of these investors were owners of multiple properties, with Glasgow’s and Bradford’s landlords especially likely to invest in more than one property.
Over the first six months of this year, Birmingham’s rents averaged £766. This compares favourably to other cities that represent notable buy-to-let markets such as Nottingham (£639), Manchester (£693) and Leeds (£703). It is, however, considerably lower than London’s average of £1,900 over the same period.
London took the top spot on the list of buy-to-let hotspots, and areas within the capital’s commuter belt are also doing very well. Landlords are increasingly looking for better value in locations outside of London but within sufficiently easy reach to benefit from the demand that the capital generates, and this is proving to be good news for the markets in places like Luton (which placed 19th on the list compared to 62nd last year) and Milton Keynes (which rose from 28th to 20th).
Speaking about the information gleaned from the firm’s data, Barclays’ managing director of mortgage lending Andy Gray said: “It’s encouraging to see home owners are still feeling confident about the rental market and view buy-to-let as a valuable way to support their finances.”
According to the recent budget, the country’s growing number of landlords will soon see their currently-attractive tax breaks eroded. “Wear and tear” allowance will only be claimable when furnishings are replaced from next April, and by April 2020 the 40-45% tax relief available to wealthier investors will be restricted to 20%.