Whether you’re brand new to buy-to-let, an existing landlord making a new purchase, or someone who’s simply looking to remortgage, there’s plenty to celebrate during this holiday season: the costs associated with allowing you to realise these aims continue to drop.
So intense are the mortgage rate wars being fought out among the UK’s lenders that the rates on these products keep on sinking, as latest quarterly figures from Mortgage Brain show. According to the broker technology provider, the cost of the average two-year fixed buy-to-let mortgage, based on a loan-to-value (or LTV) of 60%, is now 1.7% lower than it was a year ago
What this means is that those taking out a £150,000 mortgage can expect to make annual savings of £126. Meanwhile, those applying for a two-year tracker buy-to-let product with an LTV of 70% can expect to pay 4% less than they did 12 months ago, amounting to a £324 yearly saving on a mortgage of £150,000.
Costs catastrophe
Great news for prospective and existing landlords, then. But for many investors, these changes are unlikely to offset the higher costs that they face elsewhere.
Whether it be through larger tax liabilities through larger stamp duty bills or reduced mortgage interest relief, for example; higher repair and maintenance costs; or fees related to recent regulatory changes like the introduction of the Tenant Fees Act, the expenditure that modern landlords now face is heading through the roof.
Even considering the steady rise in average rents, total returns from buy-to-let investment have been hammered as a result of these rising costs. So why take the plunge when there are much better ways to play the UK property sector with some top dividend shares. Lest we forget, the average long-term stock picker can expect to make a very-decent annual return of between 8% and 10%.
A better property investment
Take Primary Health Properties, for example. For 2020, this business offers a tasty 3.8% dividend yield, a figure created by City expectations that the annual payout will grow to 5.8p per share from an anticipated 5.6p for 2019.
The defensive nature of its operations — the FTSE 250 firm rents out primary health properties across the country — means that it has the sort of earnings visibility that has seen it raise shareholder rewards unceasingly over the past 22 years and means that it should continue to do so.
And what’s more, Primary Health Properties continues to expand its estate to give its bottom line an extra jolt. The business bought a site comprising two GP surgeries and a pharmacy in Bolton just this week for a cool £8m, while it also announced it had been contracted to develop and fund a facility in Banagher, Ireland at a cost of €5m.
Now Primary Health Properties trades on a forward P/E ratio of 25.3 times, making it a little costly on paper. I believe, however, that such a premium is deserved given the firm’s rising footprint in a robust market, and one which offers some brilliant structural opportunities given the UK’s rapidly-ageing population. I reckon this firm, unlike buy-to-let, could offer some stunning returns over the next decade.