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London buy-to-let sales down 5.8%

The south east of England has overtaken London as the region with the most buy-to-let purchases in a calendar year for the first time, with the north west almost edging the capital into third place.

Specialist buy-to-let mortgage broker Commercial Trust said the south east accounted for 16.5 per cent of purchases in 2018, up 1.7 per cent on the previous year.

London, which has traditionally held the top spot, saw purchases falling 5.8 per cent year-on-year to 12.9 per cent of the total in 2018, and took second place.

Andrew Turner, chief executive at Commercial Trust, said the figures backed up the consensus that investors were currently looking outside London and noted the continued growth in the south east, which is prime commuter-belt for the capital.

Mr Turner said: “With a multitude of transport and infrastructure projects underway in and around London, it will be interesting to see if this trend continues.”

The capital only narrowly held on to second place, as purchases picked up in the north west, too.

This region accounted for the biggest growth at 4.7 per cent, meaning it was home to 12.5 per cent of buy-to-let purchases.

Year-on-year, the north east also made big regional gains, with proportional growth of 3.22 per cent, the second highest increase.

Mr Turner said: “North west and north east are proving to be increasingly popular, typically offering cheaper house prices and better rental yields.”

Overall, Commercial Trust saw a 24 per cent year-on-year increase in the volume of buy-to-let purchases to the end of 2018, despite changes to the application process by many lenders following Prudential Regulation Authority rules introduced in 2017.

Mr Turner said: “These figures are encouraging for two reasons: they demonstrate that many investors still have confidence in buy-to-let and are continuing to invest in rental property.”

At 55 per cent, remortgages represented the biggest portion of applications, according to the broker.

“Remortgaging continues to be a leading trend and undoubtedly investors have been keen to take advantage of low interest rates,” said Mr Tuner.

“2018 also saw the anniversary of two-year deals, taken out in the surge that came ahead of the additional stamp duty surcharge, introduced in April 2016.

“As those two-year anniversaries approached, many landlords were looking to remortgage, before their mortgage payments reverted to the lender’s standard variable rate.”

Landlords have been subject to a number of regulatory changes in recent years, with the introduction of an additional 3 per cent stamp duty surcharge on second homes in April 2016, which was closely followed by cuts to mortgage interest tax relief.

Buy-to-let borrowers are also now subject to more stringent affordability testing under the Prudential Regulation Authority’s tightened underwriting rules.

The Intermediary Mortgage Lenders Association (Imla) said this week it believes this year’s tax return will be the first time many landlords will see the effects of these policies on their earnings.

Source: FT Adviser