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Is it better to invest beyond London?

We all know the drill with London property prices. They’re outrageous. You have to be a City broker or a millionaire entrepreneur to afford a broom cupboard. To put it more specifically, according to a recent study you need to earn £140,000 a year to buy an average London flat without a huge deposit. But now, some members of Generation Rent, unable to accept that they’ll never get on the property ladder, are turning their thoughts away from London and the south-east and looking north.

A current trend is for first-time buyers to invest in buy-to-let property in parts of the country where prices are lower, mainly in the Midlands or the north, as a means of getting that vital first foot on the property ladder. This phenomenon has become part of the changing face of UK property ownership.

How much recent changes in the law will affect numbers doing this remains to be seen. Tax relief on buy-to-let mortgage interest payments has been slashed, starting in April 2017, which means profit from rent will fall. Add on the new three per cent stamp duty on buy-to-let properties (and second homes), and it’s pretty clear that being a buy-to-let landlord isn’t going to be the licence to print money that it once was.

Nevertheless, the tax changes don’t necessarily mean it won’t be worthwhile considering buying to let if you want to buy but can’t afford London. But it does mean that the volatile buy-to-let market is even more tricky and uncertain. Lenders are picky, and bear in mind that there are tougher conditions for buy-to-let mortgages: as a general rule you’ll need a 25% deposit and a decent credit score to be considered. You’d be well advised to use the expertise of a mortgage broker to help you navigate these stormy waters.  

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