Developments in Regional Cities Receive Record Number of Enquiries from Buy-to-Let Landlords
Despite an 11th consecutive base rate rise from the Bank of England and imminent changes to capital gains allowances, the demand for buy-to-let investments in regional cities is the highest it has been in five years, reports Birmingham-headquartered Wavensmere Homes. Recent volatility in the banking sector has seen high net worths seeking to take money off financial institutions’ balance sheets – as only the first £85,000 is protected – and invest in bricks and mortar.
The buy-to-let market is undergoing an unprecedented amount of change, with the tax-free capital gains allowance decreasing by more than 50%. Some landlords are choosing to move properties into a limited company to benefit from enhanced legal protection and the lower corporation tax rate. There has also been speculation about landlords seeking to reduce their portfolios, but this is being allayed by soaring rental increases.
James Dickens, Managing Director of Wavensmere Homes, said: “The Bank of England base rate has risen to 4.25%, inflation is around 10%, but rents have risen by well over 20% in some cities. The number of new homes currently being built in the UK is around a third of the actual need, and with Help to Buy scrapped, it is harder than ever for first time buyers to get a foothold on the property market. Both of these relatively recent issues are fuelling demand for quality rental homes, therefore increasing the number of buy-to-let enquiries we are receiving.”
“For every home available to rent, there can be as many as seven people vying to occupy it. It is no surprise we have therefore seen rent hikes of 24% for soon to be completed homes at our Belgrave Village scheme in central Birmingham, and similar increases of 22% at Nightingale Quarter in Derby City Centre, where the final phases of our £170m scheme are being matched with buyers.
“With the continued rise in the cost of living, hardworking people are more trapped than ever as renters, because mortgage deposit payments are so hard to save for. Meanwhile, the volatility regarding Credit Suisse and Silicon Valley Bank has led to a dramatic rise in higher net-worth individuals seeking to take cash out of financial institutions and invest in property. The majority of enquiries we have received over the past few weeks are for apartments priced below £300,000. The EPC A and B energy performance and on-site facilities we provide across our development portfolio is a huge attraction.”
At Wavensmere Home, we have over 3,500 properties in production, or in planning. The largest live developments include Nightingale Quarter in Derby city centre, where 925 houses and apartments are being delivered on the site of the former Derbyshire Royal Infirmary. Over half of the homes at the £170m redevelopment will be completed during 202, with prices for high-specification one- and two-bedroom apartments starting from £185,000.
In central Birmingham, Belgrave Village has become one of the city’s fastest-selling residential schemes, with 115 sales being secured by Wavensmere Homes in one day. The 12-acre regeneration site was previously Joseph Chamberlain Sixth Form College and Birmingham Sports Centre, but had lain derelict for 20 years. On completion, the development will comprise 438 houses and apartments, which are currently priced from £210,000.
James Dickens added: “The changes to the capital gains thresholds will impact the profitability existing landlords have known, but the soaring rental demand and unprecedented increases in rent that quality properties can command is already outweighing this stealth tax. The private rental market is vital to the health of the housing market, as it provides accommodation for those unable to get on the property ladder. It also provides customers with a choice, so they do not feel forced to live in a build-to-rent operated block, which typically are more expensive. We are building five development phases simultaneously at Nightingale Quarter in Derby to try and meet buyer demand.”