Fundamentally, yield levels for buy-to-let remain very competitive compared to other forms of investment. The latest Your Move England and Wales Buy to Let Index shows the average rental property returned 4.4 per cent to landlords in August 2017, an impressive return compared to traditional savings.
However, the London market has seen increased pressure on prices during the last 18 months. This has been particularly acute in the wake of the UK’s vote in June 2016 to leave the European Union.
But this slowdown in the market should not be seen as a negative; following several years of rapid growth, a period of stability and prices aligning more with wage inflation can be useful for investors, tenants and policymakers alike.
Lessons from history
In 2009, it was the brave investor who entered the property market and reaped the returns. In hindsight, many would likely agree it was a very good time to buy. With the passage of time, will investors look fondly back on the market now?
The popularity of buy-to-let is underpinned by three key factors. Despite the noise, the returns on investment, particularly in the north, are strong relative to many other sectors, especially compared to savings rates. Secondly, the current low interest rate environment has made it more attractive for investors to seek finance to remortgage on their portfolios to secure a great deal.
Finally, the growing professionalism in the sector must be seen as a positive. With historically low interest rates and strong capital growth, today’s market represents an opportunity for many landlords.
While yields have been particularly squeezed in recent months as a result of these new rules, for many, property remains attractive. While some may choose to leave the sector, other investors are deciding to stay put with an eye on the potential long-term gains available. In recent times, few investments have been able to match the stability offered by property, so it should be no surprise that the buy-to-let sector seems here to stay.
Richard Waind is regional managing director of Your Move, London & Counties