Buy-to-let landlords have certainly had a rough time of it lately. A raft of legislation changes, such as alterations to mortgage interest tax relief, Stamp Duty surcharges and the Right to Rent scheme have all provided difficulties for investors.
The fact is that these tax changes mean that buy-to-let does not offer as lucrative returns as it once did. However, many people still believe that this asset class offers a solid, stable investment.
A soaring demand for rental property is underlined by the fact that the average age of a first-time buyer in the UK is now 35 – as opposed to 24 one decade ago.
Offering his assessment, Stephen Reade, letting operations manager at Harrison Murray Lettings, part of the Nottingham, said: ‘Becoming a landlord can be a rewarding experience and, if done correctly, provide a steady and sustainable return as an income investment, especially compared to lower savings rates and stock market swings.’
‘Investors are snapping up property in the hope that it will not only return a reliable yield but also a benefit from capital growth given enough time. Mortgage rates at record lows are helping buy-to-let investors make deals stack up,’ he continued.
Buy-to-let investment is still a reliable asset class
Moving on, Reade urged landlords to make sure their figures add up before investing.
‘One day they [rates] must rise and you need to know your investment can stand that stress test, a criteria sought by many lenders recently. Recent history provides an important lesson in how returns can be hit. Many buy-to-let investors who bought in the boom years before 2007 struggled as mortgage rates rose. A sizeable number were thrown a lifeline when the base rate was slashed to 0.5 per cent. Rates stuck there until this summer and then were cut again after Brexit, but they will rise again.’
‘Even considering the recent tax changes and potential for buy-to-let mortgage costs to rise, there are many positives. We are becoming a nation who sees renting as a flexible lifestyle choice and is far more sociably acceptable. With greater demand from tenants, rents that should rise with inflation and the long horizon for interest rate rises, mean many investors are still tempted by buy-to-let,’ Mr Reade concluded.