As the buy-to-let market faces up to a number of tax and policy changes, as well as the economic instability created by the Brexit vote in June last year, many predicted it would be the beginning of the end.
The worry was that what had provided a steady stream of income for landlords and a way of ensuring a continuous housing supply for tenants would become less appealing as some of the tax incentives were withdrawn.
In the UK the buy-to-let market is worth more than £227bn, according to The Northview Group’s Keith Street, vice chairman, group lending.
Bricks and mortar investment
The UK has long believed in bricks and mortar as a good long-term investment and this enduring relationship with property appears to be holding.
Robert Sinclair, chief executive of the Association of Mortgage Intermediaries, comments: “As an asset class, property in the UK has always been seen as a relatively strong home for value. Even after downturns values return relatively quickly and hitherto, residential has been a quite liquid market.
“As a long-term investment it has historically performed well, therefore as an asset class it still appears popular as a capital investment, even if the income gains are being eradicated by tax changes.”
What has helped the buy-to-let market remain buoyant in recent years is increasing demand for rental properties, particularly in areas such as London, where younger people are unable to save a deposit for a property of their own.
Jamie Smith-Thompson, managing director of Portafina, explains: “First-time buyers now need much larger deposits than before. The days of 100 per cent mortgages have gone and most buyers will need a deposit of around 10 per cent, or more. High house prices mean it will take the average first-time buyer a lot longer to save for a deposit than it used to.
“As a result, more and more of the younger generation are moving into the rental market.”
“In a housing market where the primary characteristic is a shortage of supply against a background of strong population and household growth, it is likely that investment in residential property will remain a popular choice for many,” predicts Paragon Mortgages' managing director John Heron.
He believes the private rented sector is now a crucial part of the UK’s housing tenure mix, providing a home for one in five households in the UK, including families.
“People rent for a variety of reasons; from the flexibility it provides to the difficulty of affording a mortgage to buy a home. This is unlikely to change in the short-term,” he says.
Supply and demand
Property investment is generally perceived as a far more secure investment than one made in the stockmarket. It also generates high returns than any money left sitting in a bank or building society savings account when interest rates remain so feeble.