The quarterly buy to let index for the second quarter of 2018 has named Luton the top buy-to-let area. The index rates locations by capital value growth, sales volumes, rental yields and rental price growth.
The Bedfordshire town has capital growth of 7.29% and rental yields of 3.91%. After Luton in the index is Colchester, then Romford. Birmingham and Manchester are in fourth and fifth place.
The index revealed that the worse area for buy-to-let is East Central London, with capital growth at a negative 13.86% and rental yields of 2.86%. Other low-performing regions include Durham, Crewe, Sunderland, Blackburn, West Central London and Lancaster.
The report’s authors point out that assessing a buy-to-let investment should consider all factors, capital growth, rental yields, house prices and rental growth. A good figure in one factor can be let down by a deficient performance in another.
Sales volumes in most areas have slowed down with many landlords not wanting to purchase new property to add to their property portfolios. Nationally, sales are down 6.77%. The buy-to-let index indicates that most landlords are adopting a “buy, hold and remortgage strategy”, perhaps due to current levels of political uncertainty.
Though commercial mortgage rates are low, tougher new affordability rules, tax relief reductions and the uncertainty caused by Brexit have caused many landlords to wait for a while before considering new purchases. Some have released capital through remortgaging, while others have improved properties or converted them to houses of multiple occupancy in order to charge higher rents.