For decades, investing in bricks and mortar has been seen as an attractive and stable way to make money. However, over the last five years or so, regulatory and taxation changes have dampened the appeal of buy-to-let and reversed some of the growth of the private rented sector.
Despite investor purchases rising in 2021, we estimate there are now around 263,000 fewer rental homes in England than there were at the sector’s peak in 2017.
These changes have had behavioural effects too – today’s average landlord looks a little different to the one five years ago. The tapering of tax relief available on mortgage interest, known as Section 24, has forced investors earning lower yields to sell up while sending new investors in search of higher yielding properties.
The amount of time and research needed to make the sums stack up means investors are more likely than ever to be full-time landlords, many of whom own several properties in a limited company. Last year, a record number of buy-to-let companies were set up in the UK, 20% of which had more than three mortgaged properties on the books – this is what’s commonly referred to as the ‘professionalisation’ of the sector.
As we enter 2022 however, a high inflationary environment is sending investors searching for alternative ways to make money. And, with mortgage rates at historic lows and yields on the rise, many are turning to buy-to-let once again.
In this report we draw on the lessons learnt from the past about how investors have made money. We look at what the future might hold and how this should shape the way new investors begin their buy-to-let journey, or grow an existing portfolio. If history has taught us anything, it’s that diversification will be the key to navigating uncertainties in the years to come.
