If you’re an exasperated buy-to-let investor, you could be forgiven for wanting to throw the towel in. The numerous changes to the tax system, from reducing tax relief and increasing stamp duty to changing capital gains liabilities for residents-cum-landlords, have seriously damaged investor returns in recent years.
Throw in the reams of extra regulations that now govern rental properties into the bargain, and there’s enough there to test the patience of a saint.
Fancy making an £80k profit? So what can landlords expect to make if they decide they’ve had enough and choose to sell up? Well, data from Hamptons International has revealed many a property owner offloaded last year and made a tidy profit.
According to the estate agent, “the average landlord in England and Wales sold their buy-to-let in 2018 for £79,770 more than they paid for it (before tax), having owned the property for 9.6 years on average.” And 85% of sellers made a gross profit on the property, versus 15% who made a loss.
Hamptons’ report shows that there’s a huge disparity regarding what landlords can expect to make though, depending on where in the country they own. Those who sold in London last year made the biggest gain of £248,120 over a 9.6-year period, reflecting the electric house price growth there in the past decade.
Conversely, buy-to-let investors in the North-East of England reported the lowest average level of gross profits — just £11,810 over the past 9.3 years.
| Region | Average landlord gain (2018) | YoY change in average gain | Average ownership (years) | % of landlords making a profit |
| London | £248,120 | -£24,000 | 9.6 | 96% |
| South East | £108,220 | -£4,080 | 9.3 | 96% |
| East | £88,410 | -£380 | 9.3 | 95% |
| South West | £62,540 | +£3,460 | 9.1 | 91% |
| West Midlands | £39,970 | -£480 | 9.7 | 84% |
| East Midlands | £39,090 | +£2,020 | 9.5 | 86% |
| Wales | £32,410 | +£5,340 | 10.1 | 76% |
| North West | £30,160 | +£400 | 9.9 | 74% |
| Yorkshire & The Humber | £26,870 | +£4,490 | 10.0 | 74% |
| North East | £11,810 | -£4,270 | 9.6 | 56% |
| England & Wales | £79,770 | -£3,660 | 9.6 | 85% |
Dividend darlings So what to do in a climate of slowing property prices, increased costs, higher regulations and falling landlord rights? I’d say sell up and use the returns to invest in the stock market, an arena with plenty of opportunity to go out and make a fortune.
The booming equities space has caused the number of millionaires in the UK to balloon in recent years, and with forecasts pointing to another year of record dividends in 2019, arguably there has never been a better time to start getting serious about the share market.
And right now there’s a galaxy of low-cost stocks offering some seriously-stratospheric dividends, including some with property exposure. Take homebuilders Bovis Homes (LON:BVS) and Taylor Wimpey (LON:TW), which offer yields above 10% and deal on bargain-basement, sub-10 prospective P/E ratios. Or Unilever (LON:ULVR) and Diageo (LON:DGE), which also offer inflation-mashing yields, and which can rely on broad ranges of well-loved products to drive profits and thus dividends higher each and every year.
My advice: give the problematic buy-to-let sector a miss and spend your cash elsewhere. There’s no shortage of equities to choose from whatever your risk profile and long-term goals, and with a bit of research, it really is possible for your investments to make you richer.
Royston Wild owns shares of Diageo, Taylor Wimpey, and Unilever. The Motley Fool UK owns shares of and has recommended Unilever. The Motley Fool UK has recommended Diageo. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.
Motley Fool UK 2019