Despite a raft of regulation changes, buy-to-let investment in the long term still has strong potential to beat savings rates by a significant margin, according to property consultancy Allsop.
Research from Allsop has found that the East Midlands and Yorkshire are the best places for buy-to-let investment, with returns of 11.25% per annum over a five-year period for a 20% tax payer, and a still significant 9% per annum for a 40% tax payer.
In next place was the West Midlands with returns of 11% over five years for 20% tax payers and 8.75% for 40% tax payers.
London was the worst performing region at 5.75% per annum for a 20% tax payer and 4.75% per annum for a 40% tax payer over the same period. Of the landlords polled, 45% were higher rate income tax payers.
The survey revealed that 37% of landlords anticipate growing rents over the next six months, a year-on-year increase of 36%, and 44% of landlords had good or very good expectations for their own letting portfolio over the next three months.
However, the percentage of landlords intending to purchase one or more property in the next 12 months fell to 16%, the lowest level in just over four years.
Around four-fifths (83%) of landlords reported that obtaining buy-to-let finance had become more difficult in the last six months.
Paul Winstanley, partner at Allsop, said: “For those with equity to invest, buy-to-let returns still have the potential to outstrip savings accounts over the long term. Whilst tax changes and toughening lending criteria is challenging landlords, most are in it for the long term and we still only expect a small minority to exit as the tax changes feed through.
“With no quick solutions to the housing crisis, long-term private landlords providing decent accommodation will continue to play an important role in housing our population. As long as there are no new tax rises targeting landlords, buy-to-let will remain a stable and attractive sector for long-term investors.”
| Regional buy-to-let returns over five and 10 years | ||||
| 20% tax payer | 40% tax payer | |||
| Region | Five-year investment | 10-year investment | Five-year investment | 10-year investment |
| East England | 7.75% | 7.50% | 6.25% | 6.25% |
| East Midlands | 11.25% | 10.75% | 9.00% | 8.50% |
| North East | 9.75% | 9.50% | 7.75% | 7.50% |
| North West | 8.75% | 8.75% | 7.00% | 7.00% |
| South East | 6.75% | 6.75% | 5.75% | 5.50% |
| South West | 7.75% | 7.75% | 6.50% | 6.25% |
| Wales | 8.25% | 8.00% | 6.75% | 6.50% |
| West Midlands | 11.00% | 10.50% | 8.75% | 8.25% |
| Yorkshire | 11.25% | 10.75% | 9.00% | 8.50% |
| London | 5.75% | 6.00% | 4.75% | 5.00% |
