7 Reasons to Remain Positive as a Buy-to-Let Landlord
COVID-19 has affected everyone in one way or another. While it’s true that both landlords and tenants have been affected by the chaos that COVID-19 has brought into the market, the good news is that things seem to be looking up. The Buy-to-Let landlord-tenant relationship is a symbiotic one, and that’s certainly been the theme of the last several weeks. We’ve seen furloughed tenants, job losses, and general financial upheaval, but right now the property market has remained stable and continues to have positive sentiment in the medium-long-term.
Here are seven reasons why Buy-to-Let landlords should have a positive outlook on the future.
1. UK Property is Trending Positively
Property investment often relies on keeping a cool head when the going gets tough. The pandemic has exposed a lot of industries, individuals and investment assets to some unique effects and it’s true that data during the recent crisis has made for sober viewing. Right now, however, landlords are starting to see welcome signs of life – confidence that will continue to grow as uncertainty subsides and the lockdown lifts.
This is particularly prominent in the SevenCapital Property Market Forecast, which highlights the UK’s potential to rebound and grow with forecasts as high as 12.1% from Savills. While some investors may be tempted to sell, the situation for UK property remains as it always has – those who can hold out are more likely to see returns over the long-term.
2. Letting Agents are Still Busy
If there is a silver lining to the pandemic, it’s that many industries are re-evaluating processes that are safer, more agile and forward-thinking. The rental market is no different and the measures that have been introduced during the crisis will continue to have a positive impact long after we leave lockdown.
- Agents have been putting delayed tenancy agreements in place with the help of online viewings, and they’re even getting trained in video editing.
- Tenants are making use of technology to get personal, real-time virtual apartment tours via Whatsapp and check locations using Google Street View.
- Lettings are also faster to complete than house sales – taking an average of just three weeks compared to three months – so rentals are likely to recover more rapidly.
For many renters, lockdown seems to have reinforced two key points – the importance of having an attractive, quality property (especially for those working from home) and the flexibility that renting can offer. Data suggests that even now, tenants are re-evaluating their situations and looking to their next move – the first two weeks of April saw a 30% increase in demand for rental property and that figure will likely continue to rise. This demand is further reinforced by the latest Zoopla property update, which reveals that 86% of the buyers and renters that were looking to make a change before Coronavirus still intend to do so.
3. There’s an Upward Curve in Rental Growth
The UK rental market has shown steady growth for more than three years and, as you’d expect, people are still going to need somewhere to live long after COVID-19 has passed. Before lockdown, rental prices demonstrated excellent growth and forecasts were trending positively, which seems unlikely to change in the long-term.
Most rental market growth forecasts estimate rises over the next five years – Savills, for example, expect a 13.6% rise, while Knight Frank and JLL are forecasting 10% growth and 8.5% growth respectively over the same period.
4. Buy-to-Let Investment Suits Long-Term
Property prices, much like any other investment, will always fluctuate. The difference is, in terms of asset safety, property remains one of the most stable over the long-term. While short-term events such as COVID-19 will always have an impact immediately, property has a long history of showing resilience in similar situations.
- Unlike the financial crash that occurred in 2008, there isn’t going to be a credit crunch in 2020. In fact, some experts are considering the possibility of a post-pandemic boom, similar to the 1920’s.
- Supply and demand still exist within the property market – transactions and movement have been more restricted by limitations.
Despite lockdown restrictions contributing to an immediate, small decrease in growth, a 15% rise is predicted over the next five years.
5. The Tax Benefits for a Buy-to-Let Landlord
Even with recent changes to legislation, for smaller-scale investors, the ability to offset many Buy-to-Let costs against tax is a big plus. It’s always vital to speak to a professional about tax and investments, but according to Accounts & Legal, a London accountant, there are several ways in which a Buy-to-Let landlord can make self-assessment more palatable:
- Mortgage interest costs are deductible
- You can offset Letting Agent fees against tax
- Council Tax is deductible too
- Repairs and renovations, cost of furnishings and maintenance all present tax savings opportunities
6. There’s a Shortage of Rental Properties
Research by the Royal Institute of Chartered Surveyors (RICS) last year found that despite the supply of rental property falling consistently for nearly two years, demand continues to grow. Obviously, for landlords this represents a clear opportunity to take advantage with a Buy-to-Let property, especially as the same RICS research predicts a 15% rise in rents by 2023.
According to RICS, key areas that will experience a boom in rents will be the South-West, South-East and the West Midlands – affordable areas that offer good commuter connections alongside the option to work remotely.
7. Property Remains a Prime Investment Vehicle
If you ask any Buy-to-Let landlord why they chose the asset, you’ll usually find two common reasons: a suitable property will deliver a regular monthly income that can be utilised immediately or, property offers the opportunity to realise your investment later down the line with consistent capital growth.
- Yield from rent can provide a steady stream of funds
- Capital growth builds over the lifetime of your ownership.
This obviously makes property a prime vehicle as a retirement investment. While there’s no doubt that Buy-to-Let requires effort and time, it also provides flexibility for expansion or consolidation. How you develop your portfolio is down to you and property is an excellent vehicle for balancing workload against desired returns.
The robust nature of bricks and mortar offers security, room to manoeuvre and ultimately, a solid foundation for building a second income or future retirement plan.
Waiting for the Dust to Settle Makes Sense
Everyone can agree that the pandemic has been a particularly difficult time and it’s hard to believe that things were ‘normal’ just a few months ago. Although it’s a fact we’ll all feel the effects of lockdown for some time to come, that’s no reason for a Buy-to-Let landlord to prematurely cut and run on investments that made sense before COVID-19 – particularly investments that benefit the most from a long-term holding pattern.
It’s also true that while we wait for things to settle down, the Buy-to-Let model has shown that it has the potential to rebound, with robust fundamentals that have historically stood the test of time.