The State of UK Buy-to-Let Property in 2021

After a turbulent 2020, we’re examining the current state of the UK Buy-to-Let property market in 2021 and what it means for Buy-to-Let investors.

What is the UK Rental Market like in 2021?

As we all know, the UK property market has gone from strength to strength over the past 12 months, with record-breaking prices and unprecedented demand. But while property prices are continuing to rise, what is the current state of the UK rental market?

The rental market has had a strong start to the year, to say the least. The first three months of 2021 saw consecutive growth (outside the capital) of at least 5%, with some UK regions seeing a 6.8% year-on-year increase in rents. To put this into context, as of March 2021, annual rental growth reached £889.

The driving force behind this growth is a combination of rising demand and constrained supply, which is expected to continue sustaining the rental market for the remainder of the year.

While we have seen falling interest rates make mortgages more affordable for many people, the Stamp Duty holiday has pushed the average property price to new heights. In making the property ladder less accessible, the rental market is now the convenient choice for affordability. As a result, Generation Rent is now spreading to new demographics, who are staying in the rental market for much longer.

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The Grand Exchange Exterior

City Centre or Suburban Spot?

Establishing what makes the best Buy-to-Let properties is key, but choosing an investment location is just as – if not more – important. What was once an easy decision, choosing between city centres and more suburban areas has become increasingly difficult in the past 12 months. The South-East is a prime example of this:

As we have seen more tenants prioritise outside spaces and bigger homes, London has been in a downward spiral. While London rents fell -9.4% in the year to March 2021, commuter zones and suburban spots have been thriving.

The South-East rental market is in an upward trajectory, as young professionals search for more affordable properties within a commutable distance of the capital. This growth reached a pinnacle point in February 2021, where the region saw double-digit growth (10.6%) for the first time.

Equating to a year-on-year increase of 7.8%, the prospects of the South-East rental market have seen the demand for Buy-to-Let properties in London decline, driven by the increased affordability of the region.

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Should you Invest in UK Buy-to-Let Property in 2021?

Like with any investment, it’s completely dependent on your circumstances. However, if you’re looking for an asset with a strong past performance and one that’s forecasting up to 17% growth by 2025, Buy-to-Let property is one to consider.

For much of 2020 there was a ‘wait and see’ sentiment, with both Covid19 and Brexit uncertainty holding many possibilities for the property market. Now, with a Free Trade Agreement in place and a pre-Covid19 economy on the horizon, this sentiment amongst investors is dissolving.

According to Gary Smith, Financial Planner at Tilney: “Buy-to-Let properties still remain as popular, as investors look at the relatively high-rental yields that can be achieved when compared to interest rates and annuity rates.”

With the Stamp Duty holiday offering thousands of pounds worth of savings until October 2021, the property market will not only continue thriving, but investors will have the opportunity to enter the market with some of the best Buy-to-Let properties in the UK.

Want to know more about UK Buy-to-Let?

Download our Ultimate Guide to Being a Landlord and discover how this asset can help you diversify any investment portfolio.

In the Ultimate Guide to Being a Landlord you will find:

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Emerging Buy-to-Let Market Locations in 2021?

Decisions surrounding Buy-to-Let investment locations usually focus on established city centres or suburban spots, and often overlook the possibilities that emerging locations can offer.

Emerging locations can be defined as those with great potential, which is typically signified by extensive regeneration schemes. With these projects often transforming the local landscape and in turn, boosting property prices, the best Buy-to-Let properties can be maximised within these locations.

But what are the top emerging Buy-to-Let market locations in 2021?

As we’ve already established, the demand for South-East rental property is rising. Specifically, areas such as Slough and Bracknell are the driving force behind this growth.

Slough houses some of the best Buy-to-Let properties along the commuter belt, and as more transient tenants continue to look to the town, Slough is now in the midst of its biggest transformation to date. Emerging from a £3 billion investment, the thriving town has already benefited from new residential quarters, educational facilities and amenities.

Highlighting the potential of Slough, these regeneration projects continue to encourage further growth throughout the town – bringing a plethora of new employment opportunities and up to 17.5% growth in property prices by 2024, hopefully enticing more young professionals and investors to Slough.

Yet another Berkshire town, Bracknell is also undergoing extensive regeneration. The Bracknell Vision comprises three distinct phases, all of which work towards revitalising the town to meet the demands of the modern tenant. Building on the town’s connectivity to the capital, Bracknell will become an accessible network of businesses and transport links.

As residents continue looking for more affordable living with access to London, Bracknell has quickly developed some of the best Buy-to-Let properties in the UK. Not only will the town begin offering residents city living standards, but will surpass Buy-to-Let properties in London with rental returns set to grow 9% by 2025.