Thanks to rising rents and soaring property values, landlords made an “absolute” annual return of £22,000 in January, a new index shows.
Only mere weeks before the increase in stamp duty in April as well as less than one year until the mortgage tax relief changes, landlords saw an annual return per property in England and Wales averaging at £21,988.
The data, collected on a monthly basis by Reeds Rains and Your Move estate agents factors in income from rent as well as the rising value of the property. In addition it also takes into account any periods if the property standing empty.
However, the index does not include money spent by landlords for maintenance, mortgages and rent, which is owed but goes unpaid.
This would need to be taken into consideration considering the returns of £21,988.
The original figure is made up of £13,594 from the rising value of the property, plus an extra of £8,394 of rental income over the year to January.
The Office for National Statistics recently published some data levelling the average price of a home in Britain currently at £288,000 – about 6.7% higher than 12 months ago.
The buy-to-let index shows average rents now at £790 compared to £763 this time last year.
The differences are huge between regions, with London rents averaging at £1,241 whilst the North East typically asks for £512.Monthly rents in January, by region
The gross yield on a typical rental property in England and Wales stayed strong at 4.9% in January, unchanged from December last year.
Looking at it for the whole 12-month period, this growth marginally smaller than the 5% yield seen a year ago.
Some experts have reported that buy-to-let investors are trying to snap up property before the stamp duty tax hike will hit them from April.
At the same time, a “wear and tear allowance”, which gives landlords the option to reduce the tax they pay, regardless of whether they replace furnishings in their property, will also have to step down as a new system is coming into place, that will only allow tax relief when furnishings are replaced.
Over the next few years, the monthly tax relief landlords can claim will also come down from the currently 45% to 20% by April 2020.
Adrian Gill, director of estate agents Reeds Rains and Your Move, said: “Stamp duty premiums on new buy-to-let purchases are the rhino in the room.”
“Everyone is talking about the April 1 deadline and the extra purchase costs are perceived by some commentators as potentially hazardous.”
“But this is a little simplistic. Landlords are long-term investors and generally take good advice before making a new purchase.”
“Right now in 2016 the big shift is likely to be in favour of existing landlords, potentially at the expense of those planning to start up as a landlord for the first time or expand their portfolio.”
“As such, it will be interesting to see how the rental market responds if there is a disruption to investment in supply.”
The index is based on rents on around 20,000 properties across England and Wales and shows the average late rent now stands at 8.2% of all rent due.
In comparison, this figure was at 9.8% in December, but only at 6.8% last January. It reached its high in February 2010 at 14.6%.
Source: Daily Mail