Record number of landlords paying cash in the UK private rented market
A record 65% of landlords bought property paying in cash, more than at any time in the last decade, new research shows.
Most of them are buying property in the North where homes are cheaper with 78% paying cash in the North East of England but just 42 doing so in London where values are much higher.
The move comes at a time when rents are rising, according to the latest index report from Countrywide which shows that in October rents increased by year on year, driven by growth in the Midlands and Wales.
A breakdown of the figures show that year on year rents increased the most in Wales with a rise of 2.6% to an average of £658, followed by a 2.2% rise in the Midlands to £677, then a 1.6% rise in the South West to £791.
Rents also increased in the North of England and in Scotland by 1% to £635 and £653 respectively, by 0.8% in the South East to £1,020 and by 0.3% in the East of England to £929. But rents fell by 0.9% in London to £1,690.
The report also shows that over the last year landlords buying in cash bought £21 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.
The analysis suggests that landlords have been taking advantage of record low interest rates as much of the 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, 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.
Landlords buying in Northern England and Scotland are most likely to buy in cash. Some 78% of privately rented homes bought in the North East over the last 12 months were paid for in cash. Those buying in London are the most likely to use a mortgage.
‘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,’ said Johnny Morris, research director at Countrywide.
‘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,’ he explained.
‘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,’ he added.