Why do we care about the future of The Buy to Let (BTL) market? First and foremost, because itis a crucial element of the housing mix in the UK. The sector is currently worth a significant £1.4 trillion (Cluttons), and is supported by around 2.5 million landlords. Currently, one in every five households lives in rented accommodation (approximately 4.5 million properties). In recent months (if not years) the health of the BTL market has taken up a lot of column inches. Some articles are very negative (see The Telegraph, February 2018), (some are more positive (see The Independent, April 2018) about the future.

So what is happening in the market? There was recently an uptick (albeit small) in the Halifax House Price Index. This was totally unpredicted, - and in my opinion, it shows that no one really knows what is going on in the property market.

Our views are generally skewed by our own personal circumstances. However, it is fair to say that landlords are sailing into a storm of ever-greater Government interference and regulations , and that it is getting significantly harder to make a success of investing in BTL property.

I believe the Government & Bank of England have two main aims they are looking to achieve with these tax and regulation changes:

1.       “Professionalise” the residential investment market by using higher taxes and stricter regulation to remove the “amateur landlord”.

2.       Move property ownership from investors to homeowners, in particular first time buyers - who are also benefiting from Stamp Duty relief .

The result of these changes is that the Government and Bank of England have successfully stymied the growth of the BTL market in the last couple of years. Data-driven evidence is slow to emerge in the BTL market, however, in June 2017 the Council of Mortgage Lenders (CML) predicted that BTL lending in 2018 would fall from a forecasted £38 billion to £33 billion . Additionally, according to data from UK Finance, December 2017 saw a 17.2% fall in the number of new BTL mortgages issued.

However, there is little evidence that the UK Government have been successful in encouraging landlords to sell up: the majority seem to be taking a ‘wait and see’ approach - possibly hoping that the Government will reverse the tax increases (personally, I do not see this happening for a variety of reasons). Speaking to estate agents, it appears that any BTL property that comes onto the market is still quickly snapped up by another investor, rather than first time buyers.

What is clear, is that it is getting harder and harder to make a success of investing in BTL. With house price growth stalling, the days where it was possible to make money from property by simply buying and waiting are long gone. The old adage of “Don’t wait to buy property, buy property and wait” is no longer applicable.

Landlords need to focus on finding strong yields in locations with strong rental demand. It is now more important than ever that landlords carry out their research before investing, especially as differing Councils follow different rules. If landlords do not keep up with these new rules and regulations, large fines can be dished out .

What is the future of BTL?

In my opinion the BTL market is a crucial element of the UK’s housing mix. Without it there would be an even more significant housing crisis. Renting should no longer be seen in a negative light. There are several benefits of renting over home ownership, including not having to pay for repairs, more flexibility to move when needed, no need to save for a large deposit and many more reasons to chose renting over buying.

However, landlords face ever increasing challenges and interferences, as well as tough market conditions. Despite this, it is still possible to make a success of investing in BTL. In order to do so landlords need to research their target locations, work hard to ensure their numbers stack up and make sure that they are on top of all the regulation changes. They may also choose to invest in specialist BTL investment companies, of which Somerset Estates REIT PLC is one.

Renting property has been around for centuries and will continue to make up a significant element of the housing mix.