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Is buy-to-let investment in Brighton still viable?

23.03.2017 Site Manager

Last year, we discussed the many merits of Brighton’s perennially popular buy-to-let property sector, and why you should invest. Attractive month-on-month capital growth and high yields have made Brighton and Hove a buy-to-let property hotspot, but how much has the investment landscape changed since April 2016? Is the market still worth it?

Figures indicate ‘yes’

Property prices in Brighton and Hove have surged by 500% since 1995, the biggest jump in the whole of the UK.

A fundamental point to remember when investing in the sector is that buy-to-lets are long-term investments. The city has one of the biggest private rental sectors in the UK, with around 30% of all housing stock owned by private landlords. Despite several knocks to the buy-to-let sector since April 2016, the Brighton rental market remains just as competitive as ever, with yields of more than 5% and the highest averaging rent price in the UK’s top 20 growth towns and cities.

According to what Mortgage, 20 areas in the UK have seen year-on-year residential rental prices grow by more than 3% since 2016. As well as being featured in this shortlist, Brighton is the only area where average rent has passed the £1000 a month barrier.

Why Brighton is so popular

Landlords looking to sell up and reinvest outside London this year have been advised on a recent This is Money advice piece to target the Brighton market as an alternative in the South, which places average yield at 4.3%.

Brighton is in the enviable position of being a successful city along London’s busy commuter belt with London-eque rents, without the burden of actually being a part of the London property market, which has experienced slumps since the introduction of a 3% stamp duty surcharge last April.

News of large scale developments and individual planning permission approvals are published on a monthly basis in Brighton, meaning that the market is kept healthy by a fresh stream of housing stock every year.

A perennial hit with young professionals, families and retirees, the Brighton and Hove buy-to-let sector is as diverse as it is successful. This sunny area of East Sussex is home to prestigious schools, eclectic independent shops, and has been named the happiest place to live in 2008, 2012 and 2015 and one of the best places to work in the UK.

View our current residential listings

Popular buy-to-let approaches in 2017

Landlords have adopted several approaches to improve the financial viability of buy-to-let assets:

·         Inject some equity

If you have capital elsewhere, placing a slug of equity on a property in order to bring down the loan-to-value ratio to below 70% will dramatically improve affordability

·         Set up a limited company 

Setting up a limited company to buy a property is a perfectly legitimate way to avoid a reduction of tax relief from 45% to 20% by 2020, but there are cons as well as pros. Pros include potentially tax-free dividend income from investment properties, money can be drawn out of the company for personal funds and no income tax on retained profit, therefore freeing up more cash for re-investment.

Cons include higher mortgage rates and taking on the additional costs of running a business, for example, accounts and legal fees.

·         Feel secure with a long-term mortgage deal

A five-year fixed mortgage or longer term deal tends to be more expensive than two-year market alternatives, but they aren’t required to be stress tested by the Bank of England. So, as long as you pass the affordability on a long-term rate, it’s a much simpler and straightforward process.

·         Look elsewhere

If margins on an existing buy-to-let property just aren’t worth your time, sell up and re-invest in a lower value property in a buoyant property market where demand is high and growth is reliable to improve your fortunes.

 

Our buy-to-let advice has topped Google rankings, now it’s our turn to help you. We are uniquely placed to advise on any buy-to-let investment strategy with our residential sales department and our auction and investment departments both based in Brighton and Hove.

Get in touch with our teams at residential@austingray.co.uk or auctions@austingray.co.uk for more information.