Despite the headwinds facing buy to let investors, the number of residential landlords has seen an almost 50% surge over the past 5 years. Why has the sector remained so attractive?
According to research by property agency Ludlow Thompson, the number of buy to let landlords has now reached 2.7 million, a rise of 49% from 1.8 million in 2015. Despite tax and regulatory changes, investors have found ways to adapt.
The residential rental market has stayed relatively stable throughout the coronavirus pandemic. While there have been many individual exceptions, arrears in the sector have largely remained manageable, with many landlords negotiating more affordable rents and repayment terms. Capital gains have been substantial.
The buy-to-let market has continued to provide a reliable return on investment for landlords, even during the worst of the pandemic when other forms of investments went through a period of intense volatility.
Reasons for the continued growth in the buy to let sector include -
Rising rental demand
The number of people renting their properties is now roughly equal to the number of owner-occupiers paying a mortgage. Some rent through financial necessity, for others it is a lifestyle choice. Whatever the reasons, the demand for rental accommodation increases year by year.
Record low interest rates
Since the 2008 financial crisis interest rates have been historically low, increasing the opportunity for prospective investors and lowering their costs of ownership. Despite the changes to income tax relief for high rate taxpayers, financing costs are still lower than pre 2008.
The recent 'race for space' and the Stamp Duty holiday have created a one-off surge in house prices. Some commentators are suggesting a flat market in 2021, perhaps a modest gain or a limited fall in prices. However, residential property has always delivered solid capital gains over the medium and long term. Through recessions and crises, the property market has always bounced back and gone on to new highs.