Investing in Buy To Let property has become a very different sport in recent years. In the glory days of 2000 to 2005, where we had double-digit house price growth, mortgage companies such as Northern Rock, HBOS etc were desperate to get on the Buy To Let mortgage bandwagon with very low rates and a low threshold for giving out mortgages with hardly any regulatory intervention. Almost anyone could make money from investing in property. Then we had the unexpected flourish of the property market after 2011 following the 2008 Credit Crunch and everything seemed rosy in the garden again.
Yet, over the past five years the thumbscrews on the Buy To Let market for British investors have slowly turned with new barriers and challenges. With the change in taxation rules on mortgage relief starting to bite plus a swathe of new rules and regulations for landlords and mortgage companies, it cannot be denied some landlords are leaving the Buy To Let sector, whilst others are putting a pause on their portfolio expansion.
With London centric newspapers talking about a massive reduction in house prices (mainly in Mayfair and Prime London) together with the red-tape that Westminster just keeps adding to the burden of landlords’ profit, it’s no wonder it appears to be doom and gloom for landlords… but is this really the case?
It’s true, landlords can no longer presume to buy a property, sit on it and automatically make a profit. Landlords need to see their Buy To Let investments in these tremulous times in a different light. Let’s not forget that properties produce income in the form of rent and yield. The focus should be on maximising rents and not being preoccupied with just house price growth.
Rents in St Albans since 2008 have not kept up with inflation, it is cheaper today in REAL TERMS than it was 11 years ago and some landlords are beginning to realise that fact.
St Albans rents since 2016 | 2016 | 2017 | 2018 | 2019 |
Average rent | £1,418 | £1,443 | £1,445 | £1,464 |
Average rent if increased by inflation | £1,418 | £1,469 | £1,505 | £1,531 |
Looking at the last few years (see table above), it can be noted that there is still a modest margin to increase rents to maximise your investment, yet still protect your tenants by keeping the rents below those ‘real spending power terms’ of the 2008 levels.
Buy To Let must be seen as a medium and long-term investment. Even in these subdued times rents in St Albans are 3.23% higher than they were 3 years ago and property values are 7.23 % higher than Jan 2016.
So in spite of the barriers and challenges that the Government is putting in your way, the future is bright if you know what you are doing.
Investment is the key word here. In the old days, anything with a front door and roof made money – yet now it doesn’t. Tenants will pay top money for the right property but in the right condition. And knowing where the hot spots in St Albans currently are will also help.
So if you need any assistance with this or indeed any specialist support on the future direction of your portfolio, then please get in touch with us.
