New research has revealed how UK landlords plan to invest in property over the next 12 months, and it shows marked optimism in certain locations.
Landlords based in the East and West Midlands are most likely to increase their property investments in 2020, according to new research from BVA BDRC via Paragon.
Almost a quarter (24%) of landlords surveyed in the East Midlands, which includes the likes of Nottingham, Derby, Leicester and Lincoln, said they intend to purchase a further buy-to-let property this year. This was followed by more than a fifth (22%) of landlords in the West Midlands who plan to buy more property. This includes cities such as Birmingham, Coventry and Wolverhampton.
While the research did not cover where these landlords were planning to invest, statistically they are likely to buy near where they are based. This means the Midlands could get a buy-to-let property boost this year.
Top appeal in the Midlands
Part of the impetus for this could be linked to the UK government’s recent announcement that the country’s planned high-speed rail network, HS2, is being put into motion. The first phase of the infrastructure project will see Birmingham connected to London via Birmingham Curzon Street and Birmingham Interchange. Journey times will be reduced to approximately 38 minutes between the interchange and London. Between Curzon Street and the capital, the journey will take around 45 minutes.
The second phase of HS2 will stretch into the East Midlands, with an interchange station between Nottingham and Derby. Again, this will vastly reduce journey times to London and the rest of the UK. As a result, the area’s appeal as a property investment location should increase.
Due to its position in the centre of the country, the Midlands attracts high numbers of overseas investors. It is also a popular spot for students and young professionals relocating to the area.
Regions and landlord types differ
According to the Paragon research, landlords in Yorkshire and the Humber are also highly likely to invest in further properties in 2020, with 19% saying they definitely would. The same amount of landlords in the north-east, 19%, said they would invest this year.
Areas where landlords are most likely to be laying low over the next 12 months included the south-west. Just 8% of landlords located there plan to reinvest, followed by central London (9%) and Wales (10%).
In terms of landlord types, interestingly it is the larger portfolio landlords that plan to purchase the most properties in the current climate. However, smaller landlords are much more likely to batten down the hatches or even exit the market.
A fifth of landlords who already own 20 properties or more said they would buy more this year. At the other end of the scale just 8% of landlords who own one buy-to-let property intend to purchase more.
Buy-to-let industry is changing
The buy-to-let investment landscape has arguably become more difficult for some landlords to navigate recently. The 3% stamp duty surcharge, changes to mortgage interest tax relief, stricter lending criteria and upcoming capital gains tax changes have all affected the market. While many property investors have been able to find ways to reduce the impact of these changes, some landlords may be put off the industry.
Richard Rowntree, Paragon’s managing director of mortgages, commented:
“The proportion of landlords looking to purchase new property has been largely consistent over the past two years. But we are seeing regional variations and also a greater propensity for portfolio landlords to invest in property.”
“Portfolio landlords have adopted a number of strategies to adapt to the tax and regulatory changes of recent years. We’re seeing trends such as these landlords buying stock from smaller-scale participants as they exit the market, or targeting higher yielding properties, such as HMOs.”