Monday 13 November 2017

Monthly Lettings Index - October 2017

Cash landlords spend a record £21 billion

  • A record 65% of landlord purchases over the last 12 months were made by cash buyers
  • 78% of investors in the North East paid in cash compared to just 42% in London
  • In October rents grew by 0.5% year-on-year, driven by rises in the Midlands and Wales

The rising number of landlords buying in cash means that over the last year they spent more than at any time in the last decade.  Over the last 12 months landlords buying in cash bought £21.0 billion worth of homes which is £0.2 billion more than in 2016 and a 32% increase on 2007 when they spent £15.9 billion (chart 1 and table 1).  Much of this cash has come from landlords remortgaging to take equity out of homes they already own. 

The proportion of landlords buying in cash has steadily increased over the last two years.  Over the last 12 months 65% of all homes bought by a landlord were paid for in cash, surpassing the previous high of 60% set in 2011 (table 1).  This is the highest figure since Countrywide’s records began in 2007, a year when 60% of buy-to-let purchases were paid for with a mortgage (table 1).

Landlords buying in Northern England and Scotland are most likely to buy in cash. Seventy-eight per cent of privately rented homes bought in the North East over the last 12 months were paid for in cash, with cash landlords spending £3.17 for every £1 spent by a landlord using a mortgage (table 2).  Landlords buying in London are the most likely to use a mortgage.  London is the only region where mortgaged landlords outspent their cash backed counterparts - £1 for every 67p (table 2).

The annual rate of rental growth slowed between September and October with the cost of the average new let in Great Britain rising 0.5% over the last year to reach £958 per month (table 3).  Excluding London however, where rental growth dipped back into negative territory, rents rose 1.2% over the last 12 months.  The Midlands and Wales continued to be the drivers of rental growth, where rents rose 2.2% and 2.6% respectively over the last year (table 3).

Commenting Johnny Morris, Research Director at Countrywide, said:

“Landlords have increased their housing wealth considerably over the last 10 years. This means cash purchases are steadily becoming a bigger part of the market.  But a landlord buying with cash will often have a mortgage either on their personal home or other properties in their portfolio.  Rising prices have allowed landlords to take equity out of both their personal or other rental homes to expand their portfolios. 

“Rental growth across Northern England has slowed under pressure from record numbers of new landlords.  But it’s a different story across the Midlands and parts of the South where rents are once again nudging upwards.  It looks like the last effects of the investor stamp duty surcharge have finally worked their way through the system.”

About the Countrywide Lettings Index and new methodology

The Countrywide Lettings Index has been running since 2012 and we continually seek to improve its accuracy.  From June 2017 the methodology was changed to reduce the impact of seasonality and volatility in the rental market. 

While the index remains a mix adjusted series, rent and rental growth figures for each month are now based on a three month rolling average rather than lets agreed in the last month.  The most expensive decile of homes let has been excluded to reduce volatility and the mix has been updated to include the most recently published government stock statistics.

The Countrywide Lettings Index uses data from Great Britain's largest letting agent to track changes to the cost of renting. The index is based on the 90,000 homes let and managed by Countrywide in each year, adjusting for their location and type. It is based on achieved rather than advertised rents and the published monthly rental figures are an average of the new lets and renewals of tenancies over a rolling three month period.