Is the traditional buy-to-let market as good as dead and buried?
A “leaky tap” is how one landlord describes the series of tax raids mounted on them over the last few years.
Just as one drop of bad news hit the floor, another was on its way.
It is only when you look at all three tax and regulatory changes in the round that you realise quite how bad the onslaught has been.
Only their gradual introduction has prevented mass panic in what is still a relatively illiquid market. That, of course, is why the Treasury staggers many changes. But bottom lines don’t lie and landlords are on the move like never before.
It is the biggest shift in investor sentiment specific to one sector in living memory and one that promises the most change for ordinary people. Landlords are a hugely powerful, patient and highly motivated army of investors. In the finance world, their change in behaviour is something akin to the Great Migration.
The old hunting grounds have been taken from them and now they must find new opportunities elsewhere. I am speaking to landlords every week who have left the sector they thought would guarantee their comfort in retirement.
After talking to landlords it is easy to see why CML’s buy-to-let forecast, which came out in June 2017, was revised down – with predictions that BTL lending will decrease by £5 billion in 2018.1
Several large developers have told me they are selling to fewer landlords. More homes are being bought by people who are actually going to live in them, and sales are taking place much later with fewer off-plan deals.
The overriding message I am getting is that even if landlords aren’t selling, they’re certainly not increasing their portfolio. The potential gains are simply not worth the inconvenience any more. Enter the online platforms selling slices of property investment with no fuss.
Investing via platforms, particularly crowdfunding platforms, has always been an alternative to direct investment and increasingly it is becoming a more attractive alternative for landlords.
You’ve got a perfect storm to thank for that; the PRA’s stricter lending criteria, restrictions to mortgage interest tax relief and the Stamp Duty surcharge.
Not all landlords are selling up. However, those that aren’t are, in the main, not making any more purchases. It’s just not the same game anymore.
However they still want exposure to property. Buy-to-let crowdfunding may seem like the perfect solution but throw in a market that has been climbing like a rat up a drainpipe for the last five years and the appetite for leveraged investments at high prices is limited - even if it can still be seen as a long-term investment.
One landlord, with 8 properties in three counties, told me that on top of all this, inflation was the final straw. The near certainty of higher borrowing costs in the future - when you’re already staring at a margin that has been stripped to the bone - represents an unnecessary risk.