For some time now, tighter lettings legislation and increasing taxation for landlords has resulted in media speculation that landlords are quitting the market.
But while it’s true that some have decided to stop being landlords, the reality is that a lot of rental properties come to the sales market simply because landlords have reached the end of their planned investment journey. They’re around retirement age, have made good money from property over the years and now want to realise their equity gains. Many of these are snapped up by other landlords – often professionals who are continuing to grow their portfolios – as is evidenced by the latest English Housing Survey which clearly shows that the proportion of households renting in the PRS has been holding steady for the last decade.
So what’s really happening at the moment?
According to a report published this month by Rightmove, there are currently a record number of previously rented homes for sale in Great Britain:
- 18% of properties now for sale were previously on the rental market, compared with 8% in 2010
- The hotspot is London, where 29% of homes for sale were previously for rent. Scotland and the North-East come in joint second place at 19%.
- However, the previous five-year average is 14%, so this certainly doesn’t suggest a sudden mass exodus of landlords.
“Despite the trend of more landlords choosing to sell up, it doesn’t appear to be a mass exodus, and we will need to monitor the longer-term impacts of what happens to the rental supply that is put up for sale. For example, these homes could provide first-time buyers with more choice. They might also be purchased by other landlords and put back into the rental market, which would signal a changing of the guard rather than a complete exit from landlords.” - Tim Bannister, Rightmove’s property expert
Is buy-to-let still worthwhile for landlords?
Absolutely. Provided you carry out solid research into the local market, buy well and ensure the property is let and managed professionally, you can still generate a rental income yield that’s in excess of the returns you could get from other financial investments.
Rents are currently rising at a rate in excess of inflation, which should help make buy to let more financially viable, and prices are maintaining a steady upward trajectory, meaning your equity should increase over time as well. Of course, markets and trends naturally cycle and fluctuate, so to see the best returns you need to be prepared to invest for the medium to long-term – around 15 years or more.
Scrapping Section 21
Although much has been made in the media of the ‘danger’ to landlords of Section 21 being scrapped and other planned rental reform changes making it harder and more expensive to be in the buy to let business, good landlords have little to fear, especially if they are working with a qualified agent. In fact, in most instances, it is tenants giving notice, not the other way round. A more regulated sector with higher standards is a good thing for everyone, and with demand for rental accommodation only likely to keep increasing while new social housing is still well behind building targets, we certainly need private landlords to keep investing.
If you’d like to find out about existing rentals that are either currently on the market or may be coming up for sale in your area, just get in touch with your local branch and our sales and lettings experts will be very happy to help.
