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Fewer landlords buying properties with cash, report finds

Vicky Shaw, PA Personal Finance Correspondent
·2-min read

Just over half (52%) of buy-to-let property purchases in 2020 were made with cash, marking the lowest proportion in at least a decade, a report has found.

A stamp duty holiday introduced in July has tempted more first-time and smaller landlords into the buy-to-let sector – and they tend to rely on mortgages to help fund their property purchases, according to estate agents Hamptons.

House price increases and low interest rates also mean fewer landlords are using cash, it said.

The 52% annual figure is the lowest proportion since its records started in 2009.

The proportion of cash-buying landlords fell to just 50% across the last six months of 2020, as new investors took advantage of the holiday savings.

Across Britain, the share of buy-to-let properties bought with cash peaked at 62% in 2017, but the proportion has fallen in each year since then, it said.

Landlords buying in areas where property prices tend to be less expensive remained most likely to fund property purchases in cash during 2020.

Nearly two-thirds (65%) of buy-to-let purchases in Wales were in cash. They were followed by investors from the North West (64%) and the North East (61%).

Investors in the most expensive regions of Britain were most likely to need mortgage finance. Just 39% of London landlords and 45% of those in the South East of England used cash for their buy-to-let home purchases last year.

There are also signs that rental prices are picking up.

Across Britain, rents increased by 4.3% annually in January 2021 to reach an average of £1,056 per month, with the growth driven by falling numbers of rental homes on the market, Hamptons said.

Aneisha Beveridge, head of research at Hamptons, said: “While investor purchases remain low compared with pre-2016 levels, the stamp duty holiday has tempted more small and first-time landlords back into buy-to-let, reversing a shift towards portfolio investors.

“Most of these new entrants are relying on a mortgage to fund their purchase, despite the changes to mortgage interest tax relief eating into the profitability of the sector for some.

“Since 2016 the rental sector has been buffeted by tax and regulatory changes, resulting in 250,000 fewer rental homes in England since the sector’s peak in 2017. But record-low interest rates on cash in the bank combined with the lure of a stamp duty holiday has enticed a new generation of investor, many of whom had no previous landlord experience.”

Here are the percentages of buy-to-let property purchases using cash by nation and region in 2019, followed by 2020, according to Hamptons:

Wales, 63%, 65%

North West, 68%, 64%

North East, 70%, 61%

South West, 62%, 60%

Scotland, 63%, 55%

Yorkshire and the Humber, 65%, 54%

East Midlands, 53%, 49%

East of England, 52%, 48%

South East, 48%, 45%

West Midlands, 48%, 40%

London, 48%, 39%