Tuesday, February 14, 2017
Cash landlords hit a record high
The proportion of landlords paying in cash for a property reached 61% in January 2017, the highest since records began in 2007 (figure 1). Landlords who have chosen to buy since the introduction of the 3% stamp duty surcharge in April 2016, have relied more heavily than ever on cash to fund their purchases. Over the last decade the proportion of landlords buying with cash has steadily increased. In 2007 just 41% of landlords bought a home without a mortgage, a figure which peaked at 58% by 2010 before dropping back (figure 1).
Landlords buying homes in the North of England are most likely to use cash to fund their purchase. 70% of landlord purchases in the North West of England are in cash, a larger proportion than anywhere else (table 1). In similar fashion to those who buy a home with cash to live in themselves, London landlords are most likely to use mortgage finance (table 1). As house prices in the capital have risen, there has been a correspondingly sharp fall in the number of landlords not using a mortgage.
Cash purchases drive the top and bottom of the rental market with the most and least expensive homes most likely to be bought with cash. Over the last year almost two thirds of homes (65%) costing less than £125,000 were paid for in cash (table 2). They were closely followed by the 64% of landlords who paid in cash for homes costing £1,000,000 or more (table 2). Around a quarter (24%) of all landlord cash purchases were funded by the sale of another property elsewhere.
In January 2017 the cost of a new let was 2.6% higher than in the same month last year, the fastest January increase for two years (table 3). This January saw 36% of landlords increase the rent when signing a new tenancy, up from 27% last year. Rental growth has been led by areas outside London, with rents in the capital 2.7% lower than they were last year (table 3). The three regions with the fastest growing rents were Wales (up 8.8%), the South East (up 8.2%) and the East of England (up 7.8%) (table 3).
Commenting Johnny Morris, Research Director at Countrywide, said:
“On average landlords sell a home once every 17 years meaning as prices have increased, a significant amount of wealth has built up in the sector. This is now fuelling cash purchases. With the forthcoming tapering of tax relief on mortgage interest payment, landlords have less of an incentive to borrow, suggesting more cash activity in 2017.
“Rents are rising at twice the pace of last January and there are signs that rental growth is starting to pick up in much of the country. Ten months after the introduction of the stamp duty surcharge the number of homes on the rental market is showing signs of coming down. If this fall continues over the next few months, it is likely to support rental price growth.”
Table 1 - Proportion of landlord purchases paid for in cash
Table 2 - Proportion of landlord purchases paid for in cash
Table 3 - New lets
Table 4 - relets
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Notes to Editors:
About Countrywide plc
Countrywide is the UK's largest integrated property services Group, including the largest estate agency and lettings network. Countrywide’s network of expertise combining national scale and local reach helps more people move than any other business in the UK and is structured around four key business units: Retail, London, B2B and Financial Services.
• £19 billion worth of property sold in 2015 - More homes in the UK than anyone else
• £12.1 billion of mortgages completed - Largest single mortgage broker in the UK
• 74,500 properties under management - Largest player in a fragmented market
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