UK landlords are continuing to look for cheaper properties for their portfolios, especially those with higher yields, according to new research.
The buy-to-let index from Mortgages for Business suggests investors are going for high-performing options when looking for properties in which to invest.
An analysis of mortgages arranged during the second quarter of 2017 indicates that all types of buy-to-let properties purchased in the three-month period had lower values than the overall average.
The report indicates that these lower value properties are providing better returns on a landlords’ investment. Both HMO and multi-unit purchases are achieving average yields of more than 10%.
In comparison, these properties achieved yields of only 8.7% and 7.9% respectively when remortgage transactions were factored in.
Steve Olejnik, Chief Operating Officer of Mortgages for Business, observed: ‘Landlords have been selective with their purchases this quarter, choosing properties that maximise their income with minimal investment. This strategy is likely to remain common as it allows landlords to maintain profitability while HMRC phases in restrictions on income tax relief for landlords.’
Data from the report suggests that this apparent selectivity is meaning landlords are having to cut back their rate of expansion, in comparison to last year. Indeed, the second quarter of 2017 saw a fall in the proportion of buy-to-let purchase transactions, compared to Q1.
Just semi-commercial properties saw a rise in purchase activity, with these purchases now making up 67% of quarterly mortgage transactions for this property type.
In addition, loan-to values also remained stable throughout the quarter.