Thousands of people will be rushing to purchase a buy-to-let property in the New Year. This is because, as of April 2016, stamp duty on residential purchases above £40,000 will be increasing by three per cent.
For example, a landlord purchasing a £250,000 property will have to pay £8,800 in stamp duty, rather than the £2,500 they have to pay currently. It’s quite an increase.
New tax rules have undoubtedly made it harder for landlords to make buy-to-let pay, but there is still a lot of money to be made in the business.
It’s now simply more important than ever that landlords are smart about where they are investing their money.
We like to take a fairly analytical approach at Portico, and when preparing for our Winter Bulletin, we spent some time looking at the history of buy-to-let hotspots over the past few years, and the current buy-to-let hotspots in London. I’ve detailed our findings below.
If we go back to 2012 – the year of the Olympic Games – London was brimming with positivity and yields were high.
To the east, London boroughs such as Havering and Redbridge were achieving yields over six per cent.
In fact, the only areas with yields lower than four per cent were the exclusive inner boroughs of Kensington & Chelsea and Westminster.
The momentum of the housing recovery continued into 2013 and we were still seeing nine London boroughs achieving over six per cent yields. But the sub four per cent yields were beginning to spread out to areas such as Camden and Wandsworth.
As we stepped into 2014, the sub four per cent yields had really begun to spread across west and south west London, with places such as Ealing and Richmond-upon-Thames now achieving less than six per cent yields.
In 2015, we saw the majority of London boroughs achieve yields lower than four per cent – though Barking and Dagenham still offered attractive rental yields.
It may sound a little disheartening, but yields can still be attractive if you know where to look. We have created an innovative yield calculator that can find the best rental yields in London at the click of a mouse, enabling landlords and investors to target their investment at postcode or street level.
Buy-to-let can still be incredibly lucrative, but landlords must do their research, and invest cleverly and with an open mind.
*Robert Nichols is managing director of London estate agent Portico.com