A look into the future of the buy-to-let market

With tax relief changes, a rise in Stamp Duty for second homes and strict mortgage affordability checks now in place, it comes as no surprise that a recent survey declared that 60% of landlords predict they will be affected by these changes. 

It is worth acknowledging that landlords may face yield compression, leading to low yielding buy-to-let properties being released back on to the market, creating stock for first time buyers. 

In the long term, I see no end to the ongoing trend for increasing number of people across the UK to choosing to rent rather than buy. 

Of course, many landlords have already begun to increase rents, enabling them to bridge the income gap and maintain yields. The average cost of a new tenancy in the Private Rental Sector in the UK has risen by 3.1% to £913pcm in 2016, up from £885pcm in 2015. This reflects a market where landlords are having to juggle between tenants’ concerns about rental costs, and their requirement to achieve target yields.

Our experience at the SDL Group, where we have just placed our 1,000th build to rent tenant, shows that this quality is key, with tenants becoming increasingly discerning in their choices. 

Over time, quality landlords will stay and continue to thrive and grow their portfolio. 

In addition, opportunities to reinvest profits to secure further properties will continue to exist. Within a Limited Company, a landlord’s buy-to-let portfolio can grow as income tax is no longer paid on the retained profit, freeing up additional money to reinvest. 

The buy-to-let market is one that needs to needs to survive and prosper and, with yields still potentially strong, it is right that people and businesses could still be tempted to invest in rental properties.

*See our report on The Great Buy-to-Let Debate 2017 here.

**Rob Clifford is Group Commercial Director at the SDL Group and a shareholder at Stonebridge Group and MoneyQuest