South East overtook London for buy to let purchases in 2018, research suggests

For the first time, the South East of England has overtaken London as the region with the most buy to let purchases in a calendar year, new research has found.

The analysis from specialist buy to let broker Commercial Trust shows that the South East became its biggest region for buy to let in 2018, accounting for 16.5% of purchases, up 1.7% on the previous year.

London had traditionally held that title, but with purchases having fallen 5.8% year on year, it took second place to the South East where purchases comprised 12.9% of the total in 2018.

The capital also narrowly held on to second place, as purchases picked up in the North West too. Furthermore, the North West accounted for the biggest area of growth, 4.7%, meaning the North West was responsible for 12.5% of buy to let purchases. Year on year, the North East also made big regional gains, with proportional growth of 3.22%.

‘These figures back up the general consensus that investors are looking to invest outside of London, at present. The North West and North East are proving to be increasingly popular, typically offering cheaper house prices and better rental yields,’ said Andrew Turner, chief executive at Commercial Trust.

‘However, it is also interesting to see the continued growth in the South East, which is prime commuter belt for the capital. With a multitude of transport and infrastructure projects underway in and around London, it will be interesting to see if this trend continues,’ he added.

Overall, Commercial Trust saw a 24% year on year increase in the volume of buy to let purchases to the end of 2018 at a time when buy to let became more complex, most notably as a result of changes to the application process from many lenders, in light of the Prudential Regulation Authority rules, introduced in 2017.

‘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. They may also suggest that those investors who are buying, are turning to the expertise of a broker,’ Turner pointed out.

The research also shows that the popularity of five year fixed rate buy to let mortgage deals continued in 2018. In 2016, two year fixed rate deals accounted for over 52% of all applications. However, in 2018 this fell to 30% as five year deal volumes increased significantly. Five year deals over the same period, have increased from just under 34% of total deals in 2016 to 63% in 2018.

Remortgages represented the biggest portion of application business, at 55%, although there was an increase in the overall proportion of purchase applications, which increased from 29.16% in 2017 to 31.14% in 2018.

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