Buy-to-let  

Not all gloom for rental market

Here are a few positive factors to consider if your clients are contemplating a buy-to-let investment:

• At the moment, there is a general sense of stagnation within the property market. This means that property prices are, in many areas, no longer accelerating at previous rates. 

Consequently, there may be opportunities available on the market. If you come across a property that has historically been rented out, this might mean there is less work to do upon purchase to have it ready to let.

• Market sentiment, as highlighted by the government’s survey, suggests no reduction in demand for rental homes, as thousands put on hold their dreams of home ownership in favour of renting for the foreseeable future.

In February, London estate agent Foxtons reported that in 2018 there was an 8 per cent increase in renter registrations in London, compared to 2017.

• There are big regional disparities in buy-to-let performance – and landlords are not bound geographically by where they own property. Buy-to-let yields and capital growth prospects vary across the UK, with the North West and the Midlands figuring prominently in recent data. 

Since June 2016, when the Brexit vote took place, 10 UK cities have achieved double-digit house price growth, with seven located in the north of England.

• While Brexit has arguably had a negative effect on London and the South East, so too has the price of property for would-be buyers and, likewise, rent for would-be tenants. 

With government investment in infrastructure, in particular the Northern Powerhouse, businesses have relocated to other parts of the UK and workers have followed suit. That has helped to create vibrant micro-economies for buy-to-let.

• Historically, house prices have recovered from any short-term economic or political unrest and proved resilient in the face of the financial crisis of a decade ago. Investment in bricks and mortar should always be regarded as a long-term strategy, in this context, well beyond Brexit.

• The sheer volume of buy-to-let products in the market place (1,162 in late February 2019, according to Moneyfacts), reflects a positive buy-to-let outlook from lenders. But the choice also comes with all sorts of incentives and competitive mortgage rates. 

The Bank of England base rate remains historically low and rates for five-year fixed rate buy-to-let mortgages, for example, are more than 2 per cent less than in 2010. 

The big question is how long lenders can sustain these low mortgage rates? By delaying investment in buy-to-let, some borrowers could run the risk of missing out on the lowest deals, should rates rise in the future.

We live in extraordinary times and Brexit presents its own unique set of challenges, but should not be confused with wider property market issues.

Perhaps never before has there been as much need for a buoyant private rental sector that serves the country’s escalating needs.