How are buy-to-let landlords managing their investments?

Buy-to-let (BTL) investments have been highly popular in the UK for decades. And as a leading bridging loan provider, we have seen first-hand that demand for residential property investments remains as high as ever.

Why? The appeal of long-term capital growth alongside rental income is naturally very attractive for investors, particularly for those interested in building property portfolios.

The data says it all. At the start of 1991, the average UK residential property value stood at £57,000. Fast forward 20 years to the beginning of this year, and this figure had quadrupled, reaching £249,700.

Source: Land Registry

Interest in UK residential investments has only risen during the pandemic. There was pent-up demand from the first lockdown. Tax savings of up to £15,000 were on offer during the stamp duty. And investors have been looking for perceived safe haven assets, such as real estate.

The result has been rapid capital growth of late. In fact, UK average house prices increased by 13.2% in the year to June 2021. It is the highest annual growth rate the UK has seen in nearly 17 years.

Source: Office for National Statistics

The stamp duty holiday ends on 30 September. The next day, the tax rates return to their usual levels. It will mark the end of a frenetic period for the UK property market. So, what next?

We commissioned new research to find out. Earlier this month, a survey was carried out among 512 UK property investors. We asked BTL investors how they had adapted during the pandemic, as well as their plans for the year ahead.

What did we find out?

Firstly, we found that UK landlords had shown great flexibility during the pandemic. Two thirds (65%) of the BTL investors we surveyed said that they had been flexible with their tenants’ payments during the pandemic. They did so due to the financial trouble caused by Covid-19.

While 55% said they intend to increase rents in the coming 12 months, a massive 80% said they would be happy receiving a lower rent if it means getting a better or more long-term tenant. It is an insight into the demand for trustworthy tenants, rather than the highest possible price.

Our research also showed that 60% of UK property investors feel the stamp duty holiday made the property market “too chaotic”. While 38% of the investors surveyed did purchase another property between July 2020 and September 2021, a further 32% tried but failed to do so.

This was a common issue we heard from clients. Investors wanted to purchase a property but were being let down by lenders. Many turned to fast, flexible bridging loans to get them out of a tight spot.

Crucially, seven in ten (68%) landlords said they see BTL as an attractive investment option.

BTL is not losing its appeal

This last point is very important. Despite the upward march of house prices, there have long been rumours about BTL investments losing their appeal. This is based largely around the tightening of taxation and regulation on landlords, which has taken place over the past five years.

In April 2016, an additional 3% stamp duty surcharge came into effect. A year later, the Government introduced a tapered reduction in mortgage interest tax relief. Landlords now receive a 20% tax credit, meaning those paying basic rates will be unaffected, but landlords who pay higher and additional rates will be charged more.

In 2018 there were changes to rules about HMO standards. Many landlords had to – or chose to – carry out refurbishment and renovation works within their property portfolios. The changes included prohibiting landlords from renting rooms with less than 6.51 square metres to single adults, or 10.22 square metres for two adults.

Our timely research underlines that these changes have not damaged the appeal of BTL. Instead, BTL remains highly sought after, and this trend looks set to continue for some time.

To find out how a buy-to-let loan could help you take advantage of potential property investments, check out our buy-to-let guide for more information.

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