Over the past 20 years, investing in buy-to-let has been a relatively sensible way to make money, which is why so many people would rather supplement their income or grow their wealth through property than shares or cash.
But after two decade, tax changes mean buy-to-let will no longer deliver the returns it did, and yet many people are still looking to invest in the sector, as the fundamentals still look solid, supported by growing demand from people looking to rent - the average age of a first-time buyer in the UK is now 35, as opposed to 24 a decade ago.
“Becoming a landlord can be a rewarding experience and, if done correctly, provide a steady and sustainable return as an income investment, especially compared to lower savings rates and stock market swings,” said Stephen Reade, letting operations manager at Harrison Murray Lettings, which is part of The Nottingham.
“Investors are snapping up property in the hope that it will not only return a reliable yield but also a benefit from capital growth given enough time. Mortgage rates at record lows are helping buy-to-let investors make deals stack up.”
But Reade urges existing landlords and those planning to invest in the private rented sector to “beware low rates” and ensure that that figures stack up.
“One day they [rates] must rise and you need to know your investment can stand that stress test, a criteria sought by many lenders recently,” he added.
Reade continued: “Recent history provides an important lesson in how returns can be hit. Many buy-to-let investors who bought in the boom years before 2007 struggled as mortgage rates rose. A sizeable number were thrown a lifeline when the base rate was slashed to 0.5 per cent. Rates stuck there until this summer and then were cut again after Brexit, but they will rise again.
“Even considering the recent tax changes and potential for buy-to-let mortgage costs to rise, there are many positives. We are becoming a nation who sees renting as a flexible lifestyle choice and is far more sociably acceptable. With greater demand from tenants, rents that should rise with inflation and the long horizon for interest rate rises, mean many investors are still tempted by buy-to-let.”