Buy-to-let boomed in 2013 and experts say next year looks even rosier.
The housing market is “unrecognisable from 12 months ago”, said one property commentator last week, and a wealth of statistics bear him out. During 2013 house price growth has rippled out from the capital to touch every region. Mortgage lending and transaction volumes are dramatically increased. Rents are stable. Mortgage costs remain at record lows. Together these factors appear set to deliver an attractive rental yield plus the bonus of capital growth. Is it any wonder that two in three landlords plan to add to their portfolios in 2014?
House prices in 2013
At the end of 2012 price increases were confined to London and other, isolated hot spots. The January 2013 data from Nationwide Building Society, measuring price changes from December 2011 to December 2012 – even including the capital’s stronger performance – showed a national fall of 1pc. That put the average price at £162,262.
Move on a year and activity has rocketed in 2013, in the form of increased transaction numbers and total mortgages lent, propelling prices along the way. Nationwide’s latest data shows the average price is now £174,566 – an increase of 5pc. And that is just one measure of many. Halifax, which operates a measure like Nationwide’s based on its own lending, puts the figure at 7.7pc. The two official measures most relied upon by the Government, which come from the ONS and the Land Registry, put annual growth at 3.8pc and 3.1pc.
Last month the Bank of England responded to these worries by redirecting its Funding for Lending Scheme away from residential property lending. The scheme had the effect of reducing mortgage rates and, without it, rates may rise again – although there is little evidence of that yet.
Prospects for 2014
The Office for Budget Responsibility, adviser to the Chancellor, now predicts house prices to rise 27pc by 2018. Landlords are expected to rapidly grow their borrowing to expand. David Whittaker, of specialist landlord broker Mortgages for Business, predicted a 25pc increase in business next year. “The intention of landlords to expand further demonstrates that demand for rental property shows little sign of waning,” he said. A survey of 300 clients found 57pc wanted to buy further property in 2014. Of those already owning more than 10 properties the proportion was higher, at 66pc.
A rosy outlook does not mean all landlords make easy money. Problem tenants always cause difficulties, such as those faced by Vicky Moller (above). Tax treatment of Britain’s 1.2million landlords is also expected to tighten. Capital gains tax reliefs were trimmed in the Chancellor’s Autumn Statement, and some expect further, similar measures to be introduced in 2014.
