The chancellor’s stamp duty hike may have been aimed at quelling the nation’s frenzy for buy to let homes – but it seems property remains a great provider for both landlords and property management firms.
Landlords in England and Wales made average returns of 9.6% on buy-to-let properties in the year to the end of March, and 16.5% if they bought in London – better than almost any other major class of investment.
The figures are for total returns based on a cash investor who does not pay a mortgage, and are before tax. But the compilers of the index said the numbers include all the main costs of managing a property, voids and letting fees.
Capital return helped – a jump in house prices in London caused capital return to jump 13.57 per cent in the year to March, more than twice the national figure of 6.03 per cent, and significantly higher than the 9.66 per cent return experienced by buy to let investors in the rest of the South East.
Over the same period, the FTSE 100 index of shares fell by 3.9 per cent, while deposits in even the best cash Isas have earned only 1.4 per cent.
According to Rob Weaver, Property Partner’s director of investment the strong growth in the year to March 2016 was probably affected by property investors rushing to beat April’s additional home stamp duty deadline.
“This was especially true of London, where annual returns were in double digits, reaching an eye-watering 16.5 per cent. The East was strong too, and from first-hand experience the Northern Powerhouse regeneration plan is boosting investment activity in the North West and in particular Manchester,” he said.
The index is the first regular dataset to combine rental income and capital growth to show the total rate of return of residential property investments over time. It is based on research carried out by the property crowdfunding platform Property Partner of Land Registry and ONS data.