The current property market is difficult to navigate, buyers are facing record prices alongside uncertain rule changes – including the stamp duty cut announced at the recent mini-budget. Having previously profited from increasing house price inflation combined with significant demand, buy-to-let landlords are now approaching an uncertain time. Figures shared with the Guardian show that the number of new buy-to-let mortgage deals available fell by 55% in less than a week after the mini-budget. In addition to this, research from Total Landlord Insurance also shows 17% of landlords said they planned to reduce the size of their portfolio due to the current state of the rental market.
The change comes as recent research from Propertymark revealed that the average number of available rentals on the books of letting agents has fallen 50% from 30 to 15 amidst continuing supply and demand issues. On top of this, rates on buy-to-let mortgages that remain available have risen significantly in the past week, caused in large part by the controversial mini-budget delivered by chancellor Kwasi Kwarteng. Due to the lack of available rental stock, prices rose by a record 11.5% in the year to May 2022, but have since reduced to 7.4% – with the average UK property price standing at £1,165 per month according to Hamptons.
Capital Economics has forecast that gross rental yields for landlords will hit a new low of 4.26% by the end of 2022, due to house prices climbing quicker than rents. Potential buy-to-let landlords face a daunting prospect when entering the UK property market with some experts suggesting that rising mortgage rates could prompt landlords to exit the market in significant numbers, particularly as the Bank of England’s base rate is expected to continue to increase.
However, David Hannah, property expert and Group Chairman at Cornerstone Tax discusses the top tips for buy-to-let landlords in order to succeed in the current climate:
“As a buy to let investor, particularly a new one, you must make sure that you’re aware of your legal obligations. It’s not all about buying a property and sticking it on the market, you may have to register with your local authority. it is important you check if you have minimum EPC standards and make sure you research this in your area before you go and buy. If you buy a property that isn’t suitable for letting you may have to spend a significant amount of capital before you can let it. You must make sure you buy a ready to let property that meets the national and local standards. The second thing to be aware of is do not expect this to be an easy, trouble-free experience.
You’re going to have to deal with your tenants, you’re going to have to cope with issues like repairs and redecoration and you will encounter problems. The next thing is make sure you buy in an area where capital values are likely to rise. Do not buy the best house on the worst street, buy the worst house on the best street. If you are a buy to let investor, make sure you get correct stamp duty advice when you make your purchase. There are a plethora of surcharges now but they don’t always apply. In particular, if you’re buying a fixer-upper you may not be required to pay residential SDLT and certainly not the surcharge.”
