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Is Now A Good Time To Invest In Buy-to-Let Property?

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Despite the COVID-19 pandemic and the impact of Brexit, the UK housing market has surprised everyone in the industry – pundits and investors – by booming. Average property prices are at an all-time high and real estate expert Savills predict 21% growth in property values between 2021 and 2025.

When it comes to property investment, buy-to lets have long been one of the most popular investment vehicles. According to Statista data, around 4.4 million households in England alone are being privately rented, making up a large proportion of the housing market. And with rents going up and mortgage rates having come down, Buy-to-let (BTL) landlords are becoming increasingly confident. A third are said to be looking to expand their property portfolio in the next 12 months. So, should you join them?

Rental yields

Average monthly rents in the UK vary widely from around £400 in the North East to nearly £2,000 in London. Although they are increasing by about 1.6% year on year, this isn’t the whole story. While the capital may have the highest rents in the country, it conversely produces the lowest rental yield – a consequence of high property purchase prices in London and across the South East generally. Even lower priced ‘fixer uppers’ aren’t necessarily better value, especially leasehold properties that come with many restrictions on what improvements can be carried out. The infographic below shows how rental returns vary across the UK, from 3.04% in East England to 5.12% in Scotland.


Lack of supply

The UK has been facing a chronic housing shortage since the global financial crash of 2008, which the government has been seeking to address with a sustained programme to build new homes. For property investors, the fact that demand for housing is still outstripping supply by a margin could lead to a boost in profits from buy-to-let investments. Rising house prices mean that the capital value of BTL homes has been increasing noticeably. According to a recent report, BTL properties are going up in value by 5.8% year on year, which is substantially more than the 1.6% average rent increase mentioned above.

Types of properties

It is now fundamentally understood that the pandemic is having a huge impact on our work and home lives. With much of last year spent in lockdown, on furlough or working from home, the requirements of what people want from their home have changed significantly. The prospect of more home working and hybrid working post-pandemic may well have made this change permanent, and this is a big factor affecting both buyer and tenant priorities. Landlords reacting to these trends are now favouring larger investment properties that offer more space plus access to outside space or having a garden.

Mortgages for landlords

After the COVID-19 outbreak in 2020, the availability of BTL mortgages was severely impaired as lenders withdrew large numbers of deals. Thankfully, the market has calmed down and there are now very attractive rates to be had for landlords looking to buy or to remortgage. In fact, average BTL mortgage rates have been falling for months, and have now almost returned to pre-pandemic levels. The tables below use data from Moneyfacts to compare the lowest available rates, with a big jump for higher than 75% Loan-to value (LTV) rates. Also, remember to take into account upfront fees which can amount to several thousand pounds.

Is now a good statistics

Considering your options

The recent climate and resulting unprecedented situation has certainly made everyone take notice and review their investment strategies. While pre-pandemic, the buy-to-let market seemed to be cooling somewhat with new, less favourable tax treatments prompting many landlords to shrink their portfolios or dispose of their BTL assets altogether, there is now little doubt that buy-to-let property investments remain a perfectly viable option. While the landscape may have changed, property as an asset still offers excellent long-term returns for investors.

Interest rates are at a historic low, making savings accounts less appealing than ever, while borrowing is cheap. It’s the perfect combination that will tempt potential investors to put their money into buy-to-let property as the most attractive investment vehicle on offer.

If you are tempted to become a BTL property investor, now may be a good time to do so. Make sure you do your research first, and be especially thorough if you are new to the sector. Seasoned landlords will look at current trends in rent prices and the potential for capital appreciation when calculating anticipated rental yields. However, if the last 18 months or so have shown anything, it is that past performance isn’t necessarily an indicator of future performance. Carefully research the local market, to spot your niche and opportunity to respond to demand from tenants, for your best chances of success.

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