Buy to let is still expanding – but at a much slower rate than in recent years due to government intervention, says a new industry report.
Although the number of private rental homes has reached 5.3 million, the rate of growth has decreased to 5.4% a year.
Buy to let homes are now worth an estimated £1.3 trillion – with property priced at almost £175 billion added in the past year.
Because of action by the Bank of England to make borrowing harder by upping rent cover rules and HM Revenue and Customs (HMRC) changing mortgage interest tax relief and stamp duty, fewer landlords are buying investment property, says a detailed report from lender Kent Reliance.
The Buy to Let Britain survey, which is updated every six months, also looks at investment returns for landlords.
Average rents have hit a record high of £881 a month, although one in three landlords expects to hike the cost by 5%.
Gross annual returns on investment are an average £31,693 a property – a yield of 14.4% including income and price gains.
“In the last six months, buy to let has tried to find a ‘new normal’ and the industry has faced yet further intervention recommendations for stricter underwriting,” said the lender’s CEO Andy Golding.
“Meanwhile, investors have had longer to digest and react to recent tax changes due to be introduced from April 2017 – all against the backdrop of the referendum vote and the economic and political disturbance.
“The raft of measures on the radar for the buy to let were in part aimed at improving home ownership levels, so it is ironic that they are likely to achieve the opposite, with even greater upward pressure on rents, combined with the prospect of declining real incomes, likely to stretch affordability even further.”