Buy-to-let annual return rises above £111 billion
Property owned by buy-to-let landlords has reached an estimated total value of £990 billion, set to break through £1 trillion early next year.
According to a report from Kent Reliance, total annual returns - including rental income and capital gains - averaged 12.5% over the past 12 months.
By the end of March, the average property generated a return of £24,221 in rental income and capital gains, just £1,000 less than the average salary over the past 12 months. This total return figure comprises £67.2 billion in capital gains from rises in property prices and £44.3 billion in rental income.
"Buy-to-let has come of age," says Andy Golding of Kent Reliance parent OneSavings Bank, "moving from a niche asset class to one big enough to rival the stockmarket. Landlords are seeing the benefit of a structural change in Britain's housing market, with tenant demand ever strengthening. Yes, housing prices are showing signs of steadying somewhat, but growth remains each year."
Yesterday, we reported that mortgage borrowing - both the amount borrowed and the number of loans - has fallen in many regions of the UK.
More than three-quarters of new households created in the past year were in the private rented sector. New households are created from when a family buys a second home, when a couple begin living separately, when children leave home or in any number of other circumstances including an overall population increase.
Landlords are also gradually shifting their borrowing behaviour, stumping up more capital to add properties to their portfolios.
Research from Mortgages for Business suggests buy-to-let landlords are taking out lower loan-to-value mortgages and increasingly opting for ultra-long-term fixed rate deals, particularly 10-year deals.
"After the surprise stability of a majority government, landlords will almost certainly see a short-term boost of house price growth - while the threat of damaging regulation has been lifted for at least the next five years," says Mortgages for Business managing director David Whittaker.
This article was written for our sister website Money Observer
The catch-all term applied to investors who buy properties with the sole intention of letting them to tenants rather than living in them themselves, with the proceeds from the let usually used for the repayment of the mortgage. Buy-to-let investors have to take out specialised mortgages that carry higher interest rates and require a much bigger deposit than a standard mortgage. Other expenditure can include legal fees, income tax (on the rental profits you make), capital gains tax (if you sell the property) and “void” periods when the property is unlet.