Buy to let landlords are increasingly opting to invest in Manchester rather than London, according to new figures from UK Finance.
The industry body found that buy to let investment in the capital has fallen by more than 50% since April 2016 as a result of government reforms of the private rented sector including the Section 24 cuts to mortgage interest tax relief and the hike in Stamp Duty.
In the first quarter of 2017, there were just 1,126 mortgaged purchases by landlords in London. This is down sharply from 2,500 in 2014 and 2015.
The figures from UK Finance is based on a survey of lenders accounting for 85% of the UK mortgage market.
Property investment in Manchester, meanwhile, did fall after the introduction of the Stamp Duty reforms, but to a much lesser extent. There 840 mortgaged buy to let purchases in the first three months of this year, compared to a quarterly average of 1,000 in 2014 and 2015.
Bernard Clarke, a spokesperson for UK Finance, said that a surge in buy to let purchases before the increase in Stamp Duty was followed by a contraction that was felt much more acutely in London than in Manchester.
He said; “There are many differences between the two markets, but higher property prices in London can mean that rental yields there are often lower than in Manchester. That would make it more difficult for landlords in London to recover higher Stamp Duty costs and may be deterring them from investing.”
John Eastgate, sales and marketing director at One Savings Bank, said; “I wouldn’t be surprised if Manchester moved ahead of London because in the short term there is still going to be negative sentiment around London. The yield and the capital isn’t there anymore.”
Landlords are being drawn to Manchester in part because the city is undergoing a building boom with a record 6,900 residential homes under construction this year. The city is also enjoying a growing student population and the local job market has been boosted by the BBC’s move to Salford.
There have been warnings, however, that London based landlords need to be careful when investing in Manchester and other areas further from home.
Stephen Johnson, managing director of commercial lending at Shawbrook Bank, said; “It’s important for buyers to make sure they understand the localities and local supply and demand. Smarter local investors may be seeing an opportunity to divest themselves of their less desirable stock.”
If you’re a landlord concerned about the impact of recent tax changes such as Section 24 and the hike in Stamp Duty on your investments, or the effect of reforms such as the ban on letting agents’ fees and the cap on tenants’ deposits, contact Landlord Debt Advisory for a consultation on 0161 222 4311 or go online to landlorddebtadvisory.com.