Special Features

Will 2020 mark growth or exodus for buy-to-let investors?

Rozi Jones
6th March 2020
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"Although it's clear that landlords are facing extra challenges, repeated warnings of a 'landlord exodus' don't seem to have materialised."

In the three years since a raft of regulatory changes were introduced to the buy-to-let market, we've covered much of the statistical data relating to falling buy-to-let activity.

Extra stamp duty charges and changes to mortgage interest tax relief have certainly had an impact on the market, with figures from trade bodies, lenders and other experts showing a decline in buy-to-let mortgage levels and others reporting an 'exodus' of landlords in the UK.

Recent research from Just Landlords found that 27% of property investors worry they "may not be a landlord by 2021" and 30% are finding property management increasingly stressful.

Its survey revealed that both tenants and landlords believe renting will become harder once we officially leave the EU.

Uncertainty surrounding Brexit has hit an industry already affected by a stormy 2019. Last year saw a number of legal changes, including the Tenant Fees Act 2019 which banned the use of tenancy fees, limiting what tenants can be liable to pay for, with payments for inventories and references specifically prohibited.

These changes were widely lauded as a tenants’ victory but did represent an extra burden for landlords, who are also subject to new eco-friendly standards. The research showed that almost a quarter (24%) of those surveyed believe this change will have the greatest impact in 2020.

Additionally, the culmination of the Government’s phased-in changes on mortgage interest tax relief in April, restricting relief for individual landlords down to the basic rate of income tax, means 26% of landlords believe this year will be more expensive.

Although it's clear that landlords are facing extra challenges, repeated warnings of a 'landlord exodus' don't seem to have materialised.

Over the past three years, the industry has responded and adapted to these changes, introducing a raft of limited company and consumer buy-to-let products.

Landlords have also adapted, and although some have sold properties and left the sector, more experienced investors have maintained and expanded their portfolios.

As far back as 2018, research from The Property Hub found that 80% of landlords planned to increase their portfolios in 2019, with a massive 70% saying even a no-deal Brexit would be unlikely to affect their growth plans.

This figure had dipped by January 2020, but research by Precise Mortgages still found that one in seven landlords want to expand their portfolios in 2020, showing more stable market growth.

Additionally, the vast majority are still profiting from the buy-to-let sector. Research from BVA BDRC found that 84% of landlords currently made a profit from their lettings activity in Q3 and only 3% are making a financial loss of any kind. Additionally, the average rental yield is beginning to rise, edging up to 5.6% from the nine-year low recorded in Q2 2019.

Asking rents also rose in all but two regions in Q3 2019, according to research from Rightmove. Asking rents outside London were reported to be at a peak of £828 per calendar month, the biggest quarterly jump in rents at this time of year since 2015.

The latest figures from UK Finance, for December, show that buy-to-let purchase completions rose by 3.6% to 5,700 and buy-to-let remortgages saw an annual rise of 2.3%.

All the data, therefore, points to a strong start for the buy-to-let sector in 2020. With research showing that buy-to-let mortgages are beginning to see greater levels of activity, this provides an opportunity for advisers to help landlords navigate a more complex environment, get the right finance for their situation, and maintain and grow their portfolios in this year and beyond.

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