The Buy-To-Let Tipping Point: What’s Next? | Vesta Property

Buy-To-Let: What’s Next?

April 30, 2018

The job of being a landlord has changed significantly over the past few years. For some, they have had no choice but to exit the sector. Landlords have been caught in the down-draft of negative media coverage painting them as pariahs of society as a result of actions of a few such as the landlord in Lancashire fined £20,000 for failing to address its hazardous properties or the rogue landlord in Brent who managed to cram up to 40 people into a four bedroom house

While there is little data on the numbers of private residential landlords, we can assume that the majority of landlords are operating from a standpoint of good intentions.  However, being a landlord today is two-fold; on one hand you’re an investor and on the other you’re a landlord with responsibilities and legal requirements that are non-trivial. Landlords have been motivated to acquire buy-to-let properties for a number of reasons; one third saw their holdings as a form of pension, another third looked for income and capital growth and 27% said property was better than other investments. The ‘gold rush’ of the past saw many people with some extra savings, an inherited property or access to cheaper money rush in and buy a second property.   The figures speak for themselves; in a 2016 survey, 62% of landlords own one single property and only 7% own five or more.  

Pension and investment purposes dominated the reasons for becoming a landlord. One-third of landlords saw their holdings as a form of pension; one-third looked for income and capital growth and 27% said property was better than other investments.

The profile of UK private landlords, Kath Scanlon and Christine Whitehead, 12-2017

However, over the last two years, the bloom has gone off the rose as landlords have been hit with an exhaustive list of government tax hikes including changes in Stamp Duty Land Tax, capital gains tax rates and the tapering of landlords’ ability to deduct interest paid on buy-to-let mortgages.  This is on top of the requirement to fulfil legal responsibilities such as energy performance certificates, deposit protection, fire resistant furniture, electrical compliance, and depending on where the property is located, potentially a landlord licence. The impact is already being felt as a new study from Retirement Advantage shows that there’s a decline in the proportion of people willing to become new buy-to-let landlords in order to boost their retirement income. Just 35% of respondents said they were likely to consider it, with 62% saying they were unlikely to. This is a pronounced departure from the almost even 49-51% split recorded in October 2016.

Conversely, while landlords are debating their future, the rental sector goes from strength-to-strength with the proportion of households in the Private Rented Sector expected to rise to 24% by 2021

It therefore appears that the sector is at a remarkable tipping point where demand continues to rise but supply is potentially waning – due to an ever growing band of reluctant landlords facing an uphill struggle.   However, in the face of adversity there’s always opportunity and it’s reassuring to know that a quiet transformation is taking place that is not only trying to re-invent the way landlords and buy-to-let investors operate, but is also disrupting the traditional residential property market model.

This disruption is taking place thanks to a number of innovators, start-ups, industry stalwarts and property professionals who have recognised that the current buy-to-let market is broken, and that technology and sector-reinvention can provide some of the answers.

Vesta Property is one of these groups turning the existing model on its head providing real choice to both buy-to-let investors and landlords.  For example, our ‘Buy’ service provides landlords with the following benefits:

  • Acquire buy-to-let properties online at a guaranteed price – a refreshing and transparent way to purchase.
  • Geographically diverse locations – landlords are no longer limited to local properties and can benefit from alternative regions where rent yields might be higher.
  • Due diligence on each property is already completed streamlining and speeding up the process; DD can include a blend of an RICS valuation, condition survey, rent record and AST documentation.
  • Finally, but most importantly, tenants are in place meaning that income is protected for both the seller and the buyer before, throughout and immediately after the transaction.  This is a key feature of Vesta’s platform.

Important Note

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