The latest report from Allsop suggests that long-term buy-to-let investment has the potential to beat savings rates by a strong margin during the coming years.
This is despite the tax increases being implemented over recent times.
Data from the report indicates 37% of landlords anticipate that rents will rise in the next six months. 44% said that they had a ‘good’ or ‘very good’ expectation for their own portfolio in the next three months.
Despite this, the percentage of landlords looking to purchase one or more properties in the next year fell to 16%-the lowest level for four years.
83% of those asked reported that gaining buy-to-let finance has become more difficult over the last six months.
For every region, the Allsop Rent Check looked at the estimated annual return for three, five and ten year periods after tax for basic 20% and 40% tax payers. It also analysed rental yields, house price growth and running, alongside finance and legal costs.
Variables applied included borrowing on a 145% rent cover with an assumption of 5.25% interest rate, a five-year fixed term mortgage with interest rate of 3.25% and 4.5% for the remainder of the term, with running costs of 25% of overall income.
Utilising Office for Budget Responsibility national forecasts for wage growth and house prices, the top performing regions for returns were found to be East Midlands and Yorkshire. Returns here were found to be 11.25% per year over a five-year period for a 20% tax payer and 9% for a 40% tax payer.
Paul Winstanley, partner at Allsop, noted: ‘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,’ he added.