It may not seem so to the casual observer, but we think there is a future in Buy-to-Let. Recent high mortgage interest rates, slow price growth and more stringent tax rules have reduced the attraction of Buy-to-Let’s (BTL) for a number of landlords, but this doesn’t mean that the Buy-to-Let market is dead.
Recent years have seen a slow but steady trend towards greater professionalisation of the market, with larger portfolio landlords gradually increasing their share over accidental landlords.
What is the background?
There is certainly no disputing that the sector has been under fire for nearly a decade or more.
This began with changes to regulation and taxation for landlords first mooted in the middle of the last decade. Since April 2020, landlords have no longer been able to offset any of their mortgage expenses from their rental income in order to reduce their tax bill. Essentially meaning that property rental income is now taxed – at least partially – on turnover rather than profit. Instead, landlords now receive a tax-credit, based on 20% of their mortgage interest payments. This is particularly a concern for those landlords who are or have been pushed into the higher or additional rate tax bracket.
In addition, in 2016 the then government put in place a 3% Stamp Duty surcharge for those buying additional residential properties that will not be their main residence.
Landlords came under further pressure in 2023, with still more additional tax changes, high interest rates and incoming regulations. This had the effect of dissuading many from entering the market and prompting more to sell-up. Just recently the government has halved the capital gains tax allowance from £12,300 to £6,000. This halved again in April this year to £3,000.
For those landlords that have a mortgage against their property, rising interest rates will mean their day-to-day costs will be rising. Since February 2022, the Bank of England base rate has risen from 0.5 to 5.25 as of April 2024. This, on top of already increasing bills and prices of everyday items, means landlords are facing significantly higher outgoings, even with increased rents.
There Are Opportunities for Professional Landlord-Investors.
Given the challenging conditions and continued uncertainty, many property investors are reconsidering their future within the market. However, this is creating opportunities for professional landlords. As the old adage goes ‘be fearful when others are greedy and greedy when others are fearful’. So, it is not surprising that an increasing number plan to add to their portfolios. In addition, a significant proportion of landlords are diversifying their strategies to include a wider range of property types.
As a consequence, properties such as houses in multiple occupation (HMOs) have increased in popularity due to offering higher yields than BTLs.
Fluctuating house prices, which still remain lower than last year according to the Office of National Statistics, could present further opportunities for professional investors to capitalise now. And with the supply of rental properties struggling to keep up demand, landlords who offer quality, well-managed properties will surely benefit.
The market has been through a series of challenges, and many remain today, but professional landlords are not only surpassing these obstacles but also using them to their advantage, expanding their portfolios while they can, and setting themselves up for future growth.
In conclusion, while the Buy-to-Let market has faced significant challenges over the past decade, it is far from dead. The evolving landscape, marked by increasing professionalisation and strategic diversification, presents numerous opportunities for savvy investors. Professional landlords are not only overcoming these obstacles but also leveraging them to expand their portfolios and secure future growth. The current market conditions favour those who are prepared to navigate the complexities and capitalise on the potential rewards.
Are you ready to seize the opportunities in the Buy-to-Let market? Don’t let the challenges deter you. Whether you’re a seasoned investor or just getting started, now is the time to take action. Contact us today to learn more about how you can successfully navigate the Buy-to-Let landscape and make the most of your property investments. Let’s turn these challenges into your success story. Reach out to our team for expert advice and tailored solutions to help you thrive in the current market.
Let us navigate the waters while you focus on growing your property portfolio with confidence.
Don’t miss out on the opportunity to protect your assets, maximise tax efficiency, and access financing more easily. Reach out to us today and secure your future in property investment.
