Manchester and Salford see biggest rise in rental yields

Manchester and Salford see biggest rise in rental yields
February 17, 2017
Why 2017 is the year of build-to-rent
February 20, 2017

Manchester and Salford see biggest rise in rental yields

The majority of residential landlords in London and elsewhere in the UK do not intend to buy or sell more properties to let in the next five years, new research has found.

Three quarters are not planning change but of those who are some 13% in London plan to buy more properties and 9% to sell. This compares with 8% planning to buy and 15% to reduce their portfolio outside of London, according to the report from the Council of Mortgage Lenders (CML).

The survey set out to gain an insight into how landlords are coping with changes in the lettings sector and how tax is affecting buy to let property owners.

The research found that, in many ways, landlords with property in London were very similar to landlords in the rest of the UK. But the results of this survey suggest that London landlords tend to make different decisions about financing, managing and expanding their properties.

Compared to the rest of the UK, landlords with properties in London have higher disposable incomes, are more likely to be full time workers, and typically become landlords at a younger age.

In London, about 50% of landlords report at least £1,000 of monthly disposable income while, outside the capital, only one third report this level of income. London landlords are 27% more likely to be in full time employment, and 37% less likely to be retired than landlords in the rest of the country.

In London, landlords are about 25% less likely to start out as an accidental landlord, that is a landlord who has inherited rental property or who is letting a dwelling because it cannot be sold, rather than through choice. They are also about 50% more likely to become a landlord after moving in with a partner who also owns their own home.

The average age of first time landlords in London is 42, compared to 47 outside the capital and when it comes to types of property owned, London landlords are more likely to let out flats and less likely to be letting houses.

In London, 79% of landlords own flats to let, while 47% have houses of some type, including bungalows. In the rest of the country, just 40% of landlords rent flats, while 84% rent houses.

The distribution of property ownership among landlords in London is similar to the rest of the UK. Some 60% of those in London own a single property, while a further 20% own two properties – mirroring the distribution in the rest of the UK. Likewise, about 10% of landlords in London own five or more properties, similar to the rest of the UK.

Landlords in the capital are just as likely as those elsewhere to offer tenancies of more than 12 months. Almost 60% of UK landlords indicated that they would offer tenancies of longer than a year, with little variation across regions.

The research also found that landlords in London are more likely to have purchased with a mortgage and to say they understand the impact of forthcoming tax changes affecting the sector. Some 15% of London landlords purchased at least one rental property with cash. This rises to 23% outside of London.

Almost half of landlords in London had a buy to let mortgage on at least one rental property, compared to 35% outside London. This ties into the demographic profile of London landlords, as they tend to have higher disposable incomes and are more likely to be employed.

London landlords are marginally better informed of tax changes that will affect the private rented sector. The report suggests that this may reflect the higher incomes and wider prevalence of buy to let borrowing in London particularly as those landlords would be most affected by proposals to reduce the amount of mortgage interest that can be deducted against tax.

The use of letting agents is more common in London, but London landlords are less likely to opt for full management through the agent. Some 70% of London landlords employ an agent in some capacity, with about 40% of these contracting the agent to manage all aspects of the business, including finding a tenant, collecting rent, and maintaining the property. Outside London, only 60% use an agent, although about two-thirds of these opt for full management through the agency.

Using a limited company structure is still fairly uncommon, both in and out of London. Only 6.2% of landlords in the capital are incorporated, or planning to become so, compared to 2.8% outside London.