It takes time to see the implications of change happening in the economic environment. Sometimes, it may take a few years.
For example, the hike in the property tax in the country three years back is pushing the landlords or potential buyers to look beyond London, the preferred place for investors since ages.
It is not just market speculation, but a fact substantiated by analysts. Statistics indicate that more than 60 percent landlords living in the capital city chose to buy rental properties outside in the last few months.
Amongst several triggering factors, high prices and increased stamp duty are the top ones. Buy-to-let homes have also forced the rental investors to find out new avenues.
Places like Cornwall become a default choice because of lower property rates and better quality of life.
Changes happened in 2016 are showing results today
In the year 2016, the stamp duty on the second-home purchase was increased by the British government. The rise was three percent, and it was applicable on buy-to-let as well. How is the market responding to the change?
It caused a long-term effect. The trend of shifting the rental portfolios to places outside London is prevailing since last one year. People are hunting for properties that yield higher rentals at lower costs.
Obviously, it is not possible in the core city of London (even not in the outskirts). Hence, the only choice left is to move to places such as Cornwall. Here the property rates are less, and so as the competition.
Data trends show that only one in four landlords bought rental properties outside London five years ago. The proportion has increased in the last two years.
After the tax hike, people want to adopt strategies that will give higher returns. It is the reason; remote places attract them. There, the entry cost is low, and the yield is high.
Let’s take a few representative figures. They are just for the perspective of understanding. A property in London which forks around 24000 GBP stamp duty in London can be available in less than 6000 GBP for a house in places like Cornwall.
The difference is substantial. The hike in 2016 has almost doubled the average amount paid by rental investors in stamp duty.
A few areas in the country such as North England and Midlands are also attractive for rental investors. The home prices are affordable there, and the rentals are rising. Thus, it is a double benefit. You get the property at a lower cost and you get higher rentals.
Family homes are outperforming
A three-bedroom or four-bedroom property is known as a family home. It has outperformed in the sector. The prices for these homes are better and the YOY increase is also good. Hence, the number of transactions is also increasing.
Since people were waiting for Brexit clarity from past one year, they delayed the buying decision. Now, they are finalizing the deals and keeping the market dynamic and happening.
As the policies will become further clear, the property market will move accordingly.