More landlords than ever before are paying in cash when they purchase a buy-to-let property, according to Countrywide.
The proportion of landlords paying in cash for a property reached 61% in January – the highest since records began in 2007.
Since the introduction of the 3% stamp duty surcharge in April 2016, landlords have been relying more 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.
Landlords buying homes in the North of England are most likely to use cash to fund their purchase, while London landlords are most likely to use mortgage finance.
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. They were closely followed by the 64% of landlords who paid in cash for homes costing £1 million or more.
Around a quarter (24%) of all landlord cash purchases were funded by the sale of another property elsewhere.
In January, the cost of a new let was 2.6% higher than in the same month last year.
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.”
I guess where possible more landlords would pay cash but not everyone can.
Of course some of these changes mean that people will be leaving the sector entirely – which all means a constriction of supply.
Hence rents will rise 🙁
Surely this is due to the tax on interest rates not stamp duty. Stamp duty has no bearing on weather you pay cash or not.