Despite the headlines, it’s not all doom and gloom for the buy-to-let sector.
While the BTL industry has undergone radical change over the past couple of years, with several tax changes impacting many landlords, prompting some investors to quit the sector, the reality is that buy-to-let remains a ‘solid investment’, according to Andrew Turner, chief executive at specialist buy-to-let broker Commercial Trust.
Turner believes that was inevitable that tax changes, which could potentially suppress profitability in the short term, would impact upon the perceived desirability of buy-to-let investment, but firmly believes there are still plenty of opportunities for investors in the sector thanks to the fact that demand for rental housing is growing.
He said: “The expectation was that this would be most keenly felt by those with fewer properties, because adjusting to the changes would be a more painful process for new investors or those with less experience.
“However, the simple fact is that buy to let remains a solid investment option, with strong potential for an attractive and profitable return on capital invested.
“Investors should not be deterred from buy to let. Demand for rental housing is stronger than ever, the cost of debt remains relatively cheap and the housing shortage is likely to continue. Even so, any investment decision requires care and expertise.
“Many headlines have focused on one and two property investors who have left the market because they have found it difficult to adjust.
“The real story has really not been about buy to let becoming unattractive as an investment option.”
Recent figures from UK Finance also indicated an evolution in buy-to-let, rather than a mass exodus.
Jackie Bennett, director of mortgages at UK Finance, revealed in November, that forecasts for 2018 buy to let purchase activity, were likely to fall about £3bn short of expectations.
She said: “This is undoubtedly the impact of various tax, regulatory and legislative changes that have happened to landlords in the buy-to-let sector.”
However, Bennett went on to add that buy-to-let remortgaging exceeded forecasts for 2018, with lending likely to reach £27bn, representing a £3bn surplus on what was anticipated.
Turner added: “The market continues to grow and in Q2 2018 increased by 6% over 2017 levels. UK Finance statistics revealed that much of this growth was in remortgages, which grew by 15%, while purchases dipped by about 12%.
“In early August 2018, the Bank of England decided to increase rates by 0.25%. Although there has been limited market reaction so far, I expect to see market rates increase, because margins are wafer thin.
“The Bank of England has said as much itself, with repeated messages that rates are anticipated to rise gradually over the long-term.
“Landlords have responded to this and there has been significant interest in fixed rates, useful to guard against rate rises. Investors are likely to continue to do this as their renewal dates come up and therefore I’m sure the remortgage market for buy-to-let will remain buoyant over the coming months.”