The South East of England has overtaken London as the region with the most buy to let purchases in a calendar year for the first time, according to new research.
The new analysis from buy to let mortgage broker Commercial Trust Limited shows that the South East became its biggest region for buy to let in 2018, accounting for 16.5% of purchases, up 1.7% on the previous year.
London had traditionally held that title, but with purchases having fallen 5.8% year on year, it took second place to the South East where purchases comprised 12.9% of the total in 2018.
Indeed, London only narrowly held on to second place at 12.84%, down 5.79%, as buy to let purchases picked up in the North West, making up 12.54%, a rise of 4.17%.
The next biggest was the East of England with 11.62% of purchases but this was a fall of 1.69%, followed by the West Midlands with 9.79%, a rise of 1.8%, the South West with 9.17%, a rise of just 0.05% and the East Midlands with 7.34%, an increase of 1.26%.
The research shows that next in line was Yorkshire and the Humber with a decline of 2.17% to 7.34%, followed by the North East with 5.5% of buy to let purchases, a rise of 3.22, then Scotland with 4.89%, a fall of 1.57%, Wales with 2.14%, a fall of 0.9% and Northern Ireland with 0.31%, a fall of 0.07%.
According to Andrew Turner, chief executive at Commercial Trust Limited, the figures back up the general consensus that investors are looking outside of London and the North West and the North East are proving to be increasingly popular, typically offering cheaper house prices and better rental yields.
‘However, it is also interesting to see the continued growth in the South East, which is prime commuter belt for the capital. With a multitude of transport and infrastructure projects underway in and around London, it will be interesting to see if this trend continues,’ he added.
The research also reveals the popularity of five year fixed rate buy to let mortgage deals. In 2016 two year fixed rate deals accounted for over 52% of all applications but in 2018 this fell to 30%,as five year deal volumes increased significantly, up from 34% to 63%.
‘This is the likely knock-on effect of the PRA changes in 2017, which introduced tougher lending conditions for those looking at two year fixed rate mortgages, than for some five year deals,’ Turner explained.
‘Additionally, investors may well be looking to secure a rate for a longer period of time, in the expectation that interest rates could well start to rise soon, after a prolonged period of historically low rates,’ he pointed out.
Remortgages represented the biggest portion of application business, at 55%, although there was an increase in the overall proportion of purchase applications, which increased from 29.16% in 2017 to 31.14% in 2018.
‘Remortgaging continues to be a leading trend and undoubtedly investors have been keen to take advantage of low interest rates while 2018 also saw the anniversary of two year deals, taken out in the surge that came ahead of the additional stamp duty surcharge, introduced in April 2016. As those two year anniversaries approached, many landlords were looking to remortgage, before their mortgage payments reverted to the lender’s standard variable rate,’ Turner added.
