The early part of 2022 is showing all the signs of a buy-to-let resurgence, with the number of landlord purchases at their highest level since 2016. Liquid Expat Mortgages explains why UK expat and foreign national investors need to take note of this trend, what the future of UK buy-to-let might look like, and why UK expat and foreign national mortgage users are in such a strong position.
What’s Happening in the Buy-to-Let Mortgage Market?
According to research by Hamptons International, the first quarter of 2022 saw 13.9% of all properties sold using buy-to-let mortgages. This is up from 12% over the same period in 2021 and the highest since 2016, when buy-to-let purchases accounted for 15.9% of the market share. However, in 2016, the figures are slightly skewed as investors were clamouring to buy ahead of the 3% stamp duty surcharge that was incoming in April. Typically, buy-to-let investment purchases have made up around 10% of the market share since then.
It’s likely that this jump in investor purchases is as a result of the soaring demand for rental properties. According to Zoopla, demand is 43% higher than the five-year average, which may incentivise investors to capitalise on big profits, taking advantage of the 300,000 property drop in the private rental sector between 2017 and 2021.
The number of investors selling compared to buying has also fallen, with more investors buying than selling for the first time since 2016. Putting this in real terms, Q1 of 2022 saw a net gain of 13,480 rental properties in the UK, while the same period in 2021 saw a net loss of 7,640 rental properties.
What does this show?
Hamptons’ research shows that there is a great deal of confidence in the buy-to-let market at the moment. This is likely because investors want to profit from the massive demand in a time of uncertainty, where long-term renting doesn’t seem to be going anywhere.
‘In times of uncertainty, people like to put their money in areas that they deem secure’ says Stuart Marshall. ‘In the same way that people may buy gold because of its tried-and-tested reputation as a stable asset class, people also turn to property – particularly in the UK. Even in the most turbulent times, UK property has remained fairly stable. This will go some way to explaining why there has been such a bump in domestic investment. However, despite the rise, it’s likely that the increasingly difficult domestic conditions will start to hamper domestic investment prospects and the market share of buy-to-let will start to fall again.’
‘On the other hand, UK expat and foreign national investors are not subject to these conditions meaning that there will still be great incentives to invest. While UK based investors are trying to outrun rising inflation, UK expats and foreign nationals don’t have this same requirement limiting their investment prospects. By this, we mean that inflation is predicted to reach around 8% this year. So, UK investors need to find properties that outperform this inflation figure. However, there are very few areas with an average gross yield around this figure. UK expat and foreign nationals are not subject to this same inflation so have a broader range of properties available to suit a whole host of different investment goals, especially with the range of UK expat and foreign national mortgage products that are available at the moment.’
‘For many domestic landlords, the increasing regulations, EPC requirements and rising costs will limit investment to certain areas, leaving gaps for UK expat and foreign nationals using UK expat and foreign national mortgage products. The limited area choices for domestic landlords can be seen in the fact that so many of the properties purchased by landlords in 2022 were purchased from other landlords. In Q1 of 2022, 41% of investor property purchases were from other investors, having risen from 25% in 2018. This indicates that domestic investors in the marketplace are only able to buy certain properties. On the other hand, UK expat and foreign national landlords have a great deal more flexibility when deciding on a location for their investment property.’
Areas of Interest.
When determining where to invest, UK expat and foreign national investors need to pay close attention to the investment patterns of domestic investors and the reasons behind these patterns. With this in mind, the North East of England has been consistently popular amongst investors. In fact, in the first quarter of 2022, 27.7% of all investment purchases were made in the North East. The reasons behind this market share are to do with the incredible yields offered by the North East – averaging 9% in comparison to the nationwide average of 6.5%.
The North West has also long been an area of interest for investors, especially with the youth population driving rental demand. Areas of the North West like Manchester and Liverpool have become real hubs for social scenes, with Manchester in particular attracting huge numbers of students who are also staying in the city after graduation. With over 100,000 students living in the city and a graduate retention rate of 51%, it’s unlikely that this demand will go anywhere, with Zoopla having previously reported a demand to supply ratio of 5:1 in Manchester.
As always, speaking to an expert mortgage broker will help to find the best location for investment given the investors’ specific goals, as well as identifying the best deals in a competitive UK expat and foreign national mortgage market.
Liquid Expat Mortgages
Ground Floor, 3 Richmond Terrace,
Phone: 0161 871 1216
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