Is buy-to-let a good or bad investment in these uncertain times?
Is buy-to-let a good or bad investment in these uncertain times?
Over the next decade, it is estimated that house price growth could be around 15 per cent to 30 per cent. The UK has consistently failed to build enough homes for decades and that imbalance isn’t going away as the construction industry struggles to build and sell enough property stock to significantly close the gap. Property will continue to be one of the strongest long-term wealth preservation assets available.
A Professional investor is recently quoted as saying: “It’s still an excellent investment for professional landlords and experienced investors who take a long-term view.”
The days of passive investing are behind us, but despite the wider narrative, tenant demand remains exceptionally strong and quality rental property continues to deliver attractive long-term returns. It is the government`s fervent wish to see the professionalisation of the rental sector with smaller accidental landlords being unable to keep up with the ever-changing standards and rules. Larger portfolio landlords, institutional investors and build-to-rent operators will account for an increasing share of the market. That shift is already well underway in some parts of the country.
Location will always have the biggest influence on long-term performance, but caution needs to be exercised in areas that rely too heavily on a single employer or industry, as they can become vulnerable very quickly if circumstances change.
The choice between a new build and older period property is down to individual preference and probably the condition of the building. New builds often offer lower maintenance costs, better energy efficiency and strong rental appeal, while period homes benefit from character and scarcity. Location is again the deciding factor – proximity to local shops and schools, good public transport and nearby recreational areas will be key factors in tenants staying for a long term, rather than moving on after a few years.
The cumulative changes to landlord taxation over the last ten years have had a significant effect on existing smaller landlords and combined have actively discouraged new investment. The tax changes, brought in by both governments, have ranged from removing mortgage interest relief, increasing stamp duty surcharges and introducing additional regulatory costs. Ultimately, that has reduced rental supply and contributed to higher rents, which was bound to be the unintended or deliberate consequence of their choices.
Markets will always fluctuate, but allowing negative sentiment to dictate long-term investment decisions can prove to be a very expensive mistake. As with most investments, the best time to buy is at the contrarian stage when public sentiment is against such a purchase, so long as a long term perspective is taken.
The long-term fundamentals of buy-to-let remain solid, until such time as we have more housing stock and particularly social housing available to rent. Despite much of the recent narrative, rental property continues to offer a compelling combination of income, long-term capital growth and wealth preservation, for those who are prepared to accept the short term blips and are professional in the way they manage and conduct their tenancies.