BTL investment will retain its allure

Whereas those who invested in property were once seen as being ahead of the curve or making a sensible decision, there are now those who appear to believe they are making some sort of terrible mistake.
After all, look at the increased costs that now come with holding buy-to-let (BTL) properties, they argue, look at how the tax advantage has shifted, look at the greater regulatory responsibilities, look at how you have many more commitments to both the property itself and your tenants, look at how house prices have tended to bump along in recent years.

All relatively valid arguments to make, but they do not detract from the huge number of positives that property investment now offers, particularly in the BTL space, which – we must all agree – has been subject to a large number of pressures, but remains absolutely vital for so many people and the UK housing market in general. 

So, what are those reasons for continuing, or indeed starting, to invest in property? And do they hold true today in the same way they did 10, 15 or 20 years ago? 

Property investment can still be part of a solid portfolio 

Well, for a start, property should retain a key role in any diversified investment portfolio, simply because it is subject to different factors and forces than equities, for example, or indeed investment in other assets.

This is a strong reason to invest in property in the first place – its ability to provide both a monthly income and, over the long term, to deliver a capital appreciation that can be accessed and used to develop the portfolio further or, indeed, to benefit from when selling.

At any given time, I look at the headlines generated by publications that focus on stocks and shares and they all tend to suggest that a BTL investment is somehow a wasted investment, failing to recognise that the stock market can be incredibly turbulent, with the capacity to both enrich and make you feel poor in a very short space of time. 

You only need to look at the impact the Trump tariffs are having on global markets at the moment to see that stock market increases are not forever or guaranteed, and being invested in an asset class that is not directly impacted in such a way should be seen as a sound decision. 

A prevailing need for healthy BTL investment 

Plus, let’s look at the fundamentals of property investment, specifically BTL, in the UK at the moment. It’s clear that we continue to see a shortage of private rental sector properties for the demand that exists. 

Rightmove’s recent report suggests there are 12 potential tenants chasing every single rental property available. While the sector could clearly do with more supply, it presents a benefit for existing landlords in terms of both rental income and hopefully ensuring rental voids are kept to a bare minimum. 

Rental inflation, again according to Rightmove, is beginning to ease, but economics 101 tells us that when demand outstrips supply, the price will continue to move upwards, and landlords can see this both now and in the future.

Even if the UK government meets its new homes target, the majority of these will be for owner-occupation and this still leaves a rental demand-supply gap that will be difficult to fill. I suspect that, where possible, landlords will continue to add to portfolios because they know they can secure tenants and the rents they require for at least the medium term.

The market will always have its appeal 

It’s these fundamentals that are perhaps putting the BTL sector back in the shop window for potential new investors. At Fleet, we’ve certainly seen an uptick in terms of applications from first-time landlords, and while, of course, the cost of purchasing a BTL property has gone up, when the numbers work, these are likely to be strong assets and investments for many years to come.

And we should not forget that, after a fairly turbulent couple of years, the cost of financing a BTL mortgage has started to trend lower. Not hugely, of course, as there is still a strong level of volatility in swap rates particularly, but certainly with the direction of travel on rates being southwards.

Then, there is the opportunity to place landlord borrowers on more competitive rates than previously.

This combination of factors is likely to ensure the BTL market retains its investment allure, not just for existing landlord borrowers – although they will continue to make up the bulk of adviser business – but those who want to get on the first rung of the investment property ladder as well.

Advisers with strong relationships, excellent product knowledge, and a keen eye for the competitive offerings that exist are going to be worth their weight in gold to both the existing, and the new, breed of landlords. Of that, there is no doubt.