Research and reports
While rental income may be a priority for many landlords, there’s also the potential capital gain to consider when weighing up the pros and cons of buy-to-let.
This varies significantly across the country, so it can be helpful to know where the best returns are available.
Research by estate agents Hamptons International suggests that the average capital gain was almost £80,000 in 2019.
Hamptons International found that landlords sold their property last year for an average of £78,100 more than they paid for it – and that they owned their property for typically 9.1 years.
This is the equivalent of a gross gain of 42 per cent on their original investment in bricks and mortar.
However, Hamptons International said there are wide regional differences, with London leading the way.
It said the average gain in the capital was 20 times higher than that in the North East.
The average landlord in London made a gross gain of £253,580, compared to £11,710 in the North East.
The South East followed, with an average gross capital gain of £104,930, according to the research.
This isn’t surprising as house prices tend to be higher in the capital and the South East, but the returns in these areas are impressive nevertheless.
Average gross gain
Yorkshire and the Humber
England and Wales
The research also found that landlords in London were most likely to make a profit, with 97 per cent selling their property for more than they paid for it.
Landlords selling up in the North East were most likely to make a loss, with 45 per cent who sold up last year selling their property for less than they originally paid for it.
The average gross gain made by a landlord when selling up – at £78,100 in 2019 – fell for the second consecutive year, reaching the lowest level since 2015.
The £78,100 average capital gain is £2,400 less than the amount landlords sold for in 2018.
Aneisha Beveridge, head of research at Hamptons International, suggested that more than a third of landlords’ total return comes from capital growth rather than rental income in Britain.
She said: “Landlords in the South, where house prices are higher and historic price growth has been stronger, saw the greatest capital gains last year.
“In fact, the average London landlord gain was over 20 times that of a seller in the North East where landlords are more reliant on rental income. “
However, she added: “With house price growth expected to stay lower than in the past, more landlords are having to switch their focus to maximise rental income, rather than rely on capital growth.”
Would you consider average capital gains when looking for a new property for buy-to-let? Let us know in the comments below.
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