Some recent surveys have indicated that the buy-to-let market has doubled in a decade. If this true, could now be the right time to join growing numbers of private landlords with a buy-to-let mortgage?
Literally thousands of people in this country have become successful landlords since the buy-to-let explosion of the 1980s. It was at this time that it became allowed for rental income to be acknowledged when calculating the ability of the applicant to repay the loan. This meant that people with some equity accrued at their own home were able to buy more properties to rent out.
The new first time landlords found that their rental income was paying off the mortgage and sometimes a little bit more. They also enjoyed capital growth on their properties and many used them as a savings nest for their retirement.
Property prices did take a tumble in the early 1990s as well as after the credit crunch in 2007, but long term investors have still made capital gains.
All of the recent statistics have indicated long term significant growth in the private rented sector (PRS). The PRS does not include institutional investors like pension funds and other financial institutions or social landlords like universities, housing associations and local authorities.
Both the English Housing Survey and a report released by Price Waterhouse Cooper agree that the number of properties owned by private landlords has doubled since 2001. The Scottish Government carried out a household survey in 2014 which revealed that the number of people renting had also doubled in the decade previous. In addition, the amount of public funds paid to landlords as housing benefit had doubled in the same period. This indicates that perhaps a lot of the growth in the PRS has happened at the bottom end of the market.
So, is now a good time to become a private landlord? Well, the availability of buy-to-let mortgages from independent mortgage brokers has certainly improved greatly in the last five years. The loan-to-value ratios and the number of products available are not as good as they were prior to the credit crunch, but sensible investors see this is a sign of more prudent lending, which can only be a thing.
However, some other statistics shed a different light on the PRS. ‘This is Money’ recently released a survey stating that the number of private landlords who are planning to sell off their properties has doubled. It also suggested that the proportion of private landlords who said they were not looking to increase the size of their portfolio had risen to 84%. This is the highest level ever recorded.
This rise in the number of private landlords looking to sell, or at least not to buy any further properties could be attributed to the amount of perceived attacks on landlords over the last few years by the government. Nearly every budget for the last four years has included some sort of punitive element aimed at private landlords, such as increasing tax liabilities and red tape. Despite this, most experts still believe that there are profits to be made from buy-to-let investments, so long as people who are new to the market understand that it is a long term investment.
So, there is currently some unpredictability surrounding investment in the private rented sector at the moment, but definite signs that it will deliver over time.
If you think buy-to let is something that might interest you and you’d like to discuss your options, then please get in touch today.