To say that the buy-to-let sector has had a tough time of it in recent years would be one hell of an understatement. Following the punitive tax and regulatory changes introduced by George Osborne in 2015, buy-to-let has been pounded in the same way that Ali was in the legendary Rumble in the Jungle.
And while we’re yet to see that rope-a-dope moment, when buy-to-let bounces back in spectacular fashion to win against the odds, the signs, increasingly, are that it will go the distance in this fight after all.
Reflecting this, mortgage trends data published by UK Finance earlier this month showed that buy-to-let completions for new purchases increased by 5.5% in July compared to the same month last year. Other data in recent months also suggest the market has now started to rebound, despite the current chaotic political climate.
In fact, you could argue that people are doubling down on buy-to-let precisely because of the current politico-economic uncertainty. With everything that’s happening in Westminster and Brussels, the property market, even within a tougher fiscal and regulatory environment, is being seen as more of a safe haven than usual by landlords and investors.
What we’re also witnessing is a definitive shift in the way landlords acquire units and manage their portfolios. Not only have companies including ourselves introduced rapid and low cost ways for them to arrange finance, but over the past two years a significant percentage of landlords have now started to purchase new properties through limited companies, which helps to mitigate the tax hit that comes from buying as an individual.
Crucially, the landlords doing this are no longer those with the very biggest portfolios but often have between five and 10 properties. In other words, what started out as a tactic for the professional property investor and landlord has now filtered down to the long tail of committed amateur landlords with smaller portfolios.
It’s not something that has passed lenders by either, with more and more in 2019 coming out and saying they are now accepting applications through corporate envelopes. What was once seen as an exotic way to purchase is now deemed fairly prosaic, and that’s a good thing.
A lot of the property investors we have been providing finance to this year, for deposits, refurbs and whatever else, are now operating through limited companies — and all the signs are that this will continue through 2020 and beyond. It’s reinjected life into a market that not too long ago was looking like it was out for the count.
All in all, it’s increasingly clear that George Osborne underestimated his opponent, the British landlord, and could yet prove to be the one on the canvas when this particular fight is done.
Michael Biemann is the managing director of the digital property lender, Selina Finance.