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First-Time Buyers vs. Buy-to-Let Landlords: Who’s Feeling the Squeeze?
Author: Carl Shave - Director
Updated on January 28th, 2019

No more than a couple of years ago, buy-to-let investors were having it all their own way, but reports of an average 1400% return on investment since 1996 have brought about changing times.

A swathe of changes has been introduced by the conservative government to try and level the playing field for first-time buyers. While cynics might say the struggles of first-time buyers are a result of the government’s reticence to build new homes, they have also been unable to compete with surging buy-to-let investment. Whatever the cause, they have simply been priced out of the market.

The government’s changes announced in the Budget are now coming into force. The stamp duty price hikes were introduced last month, and with the reduction in landlords’ mortgage interest tax relief to be phased in from 2017, the impact on the buy-to-let market is starting to be felt.

Buy-to-Let Investors Look to Upgrade Existing Properties

Landlords have responded to stamp duty increases and other shifts in the buy-to-let landscape by choosing to invest in upgrading their existing properties. According to recent research from Paragon Mortgages, the number of landlords looking to buy new properties is down 5% on the previous quarter.

In Q1 2016, just 9% of buy-to-let landlords were looking to buy a new property, down from 14% in the final quarter (Q4) of 2015. Despite a rush to buy new properties before the stamp duty increases were introduced, landlords have decided that on the whole, their money will be better spent upgrading their existing portfolios.

Buy-to-Let Booming in Areas Like the East

Although buy-to-let investors seem to be losing interest in the saturated London market, property investment still makes a lot of sense in booming areas like the East. Average house prices in the East of England are up by more than 10% on last year, with emoov’s UK property hotspot index rating Ipswich as the 4th most sought-after place to live. This has contributed to a rise in the average UK house price of 8% on February last year, taking it to £285,000.

First-Time Buyers Still Struggling to Get on the Ladder

Of course, it’s very early days with the stamp duty price hikes only introduced last month, so as yet there has been little impact felt by first-time buyers. Data from Post Office Money Mortgages indicates that many properties are still out of reach for first-time buyers. In fact, of all the properties sold last year, just over a third were in areas where the average home was unaffordable for first-time buyers.

Brighton is officially the UK’s most unaffordable city, with only 9% of neighbourhoods within the average first-time buyer’s budget. The most affordable location in the UK is Southampton, closely followed by Norwich and Nottingham.

If you’re looking to buy a property in Suffolk, whether as a buy-to-let property investor or a first-time buyer, our unrivalled knowledge of the local property market, supplemented by expert mortgage advice, can help you find the right deal. To find out more, please get in touch today.

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