The total number of buy-to-let investors in the UK rose by 8% up to 1.63 million in the last 12 months, according to estate agent ludlowthompson.
The net income of these investors, which is calculated as rental income minus all costs, reached £13.1bn in 2012/13.
The sector is continuing to attract new money thanks to record low interest rates on bank deposits and Government bonds, with investors struggling to achieve comparable yields from other investment and savings products.
Meanwhile, capital growth for residential property was over 7% in 2014 and 16% for property in London. The FTSE-100, on the other hand, rose by just 0.7% in a year.
“The high yields on offer from buy-to-let investments make this asset class one of the few options for investors who want to avoid the volatility of the stock market,” Stephen Ludlow, Chairman at ludlowthompson, said. “A fall in inflation has also calmed fears of a sharp rise in interest rates.”
Recent regulatory changes to the mortgage market, introduced by the Mortgage Market Review (MMR) in April 2014, have made it more difficult for prospective first-time buyers to acquire mortgages. As such, they are staying in the rental market for longer.
The popularity of buy-to-let will continue to grow in the upcoming year, ludlowthompson believes, with the reforms to Stamp Duty announced in the Autumn Statement set to benefit investors. All purchases below £937,500 will now benefit from lower stamp duty costs – good news for investors because the vast majority of BTL investments fall into this bracket.
In addition, pension changes announced last year should allow potential investors to use these funds for a property purchase, offering far greater yields than pension funds. Other factors that may boost the popularity of buy-to-let include: low levels of social housing creation, the UK’s strict planning regulations, the improving economy and growth of jobs, improving transport links in Greater London, and regeneration.
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