The exodus from buy-to-let that isn’t an exodus
The latest NLA Quarterly Landlord Panel survey flashed a loud warning to the buy-to-let community a few days ago. Or did it? The headline “Good news for first-time buyers, bad news for renters” was rapidly followed by the subhead of “Up to 380,000 landlords looking to let go of property”. Sounds like the buy-to-let sector is on its last legs, doesn’t it?
Calm down! Uncover the reality, and you’ll find that it is simply business as usual.
Why could it be good news for first-time buyers?
380,000 landlords are looking to sell properties. Sounds like an exodus. If all these landlords did sell properties and did so at the same time, then there could be a flood of homes on the market. Almost 80% of the properties that could come to market would be ideal for first-time buyers. Hence the assumption of “good news for first-time buyers”.
Why could it be bad news for renters?
Of the landlords who said they plan to sell, only 7% said they intend to sell to other landlords. This could mean hundreds of thousands of properties being sold out of the buy-to-let market. For the large population of renters, there will be a massive fall in the number of properties available to rent. It could mean less choice and higher rents.
Why it could be great news for buy-to-let investors
A huge influx of properties released into the market could give buy-to-let investors some incredible buying opportunities. And you’ll be able to drive some fantastic bargains, too.
Great properties, at knock-down prices. In a market where there are fewer rental properties available to meet demand. The balance of supply and demand will swing in your favour. Rental prices are likely to increase faster, as more renters chase fewer properties.
Unfortunately for landlords and first-time buyers – and perhaps fortunately for renters – the next 12 months will be more business as usual than the apocalypse that the headlines assume.
Landlords aren’t racing to sell properties
That headline figure of 380,000 landlords planning to sell sounds horrifying. It’s like the confidence has been sucked out of the buy-to-let community. In fact, it works out to 19% of those surveyed. That’s down on the 20% who said they planned to sell in the NLA Quarterly Landlord Panel in December 2017.
In addition, selling landlords won’t choose who buys the properties they do sell. Perhaps only 7% intend to sell to other landlords, but the reality is likely to be somewhat different.
More landlords are planning to buy than sell
While the changes in mortgage interest tax relief and stamp duty dented confidence, other surveys show that landlords are growing in confidence again and are:
- Restructuring portfolios to mitigate tax (for example, by owning property as a limited company)
- Diversifying their portfolios into different property sectors
- Forecasting yields to outpace savings rates as demand for rented property grows
A recent survey conducted by Aldermore found that the negative headlines are all lies! Buy-to-let property investors are expanding their portfolios, not selling. Aldermore found that:
- 41% of landlords plan to expand their portfolio in the next 12 months
- Only 8% plan to reduce their portfolio
In summary
It’s business as usual in the buy-to-let market. The number of landlords planning to sell is falling, while those planning to expand is rising.
Some landlords may be selling to exit properties that are underperforming. Others will be buying to boost performance and long-term returns. This is nothing out of the ordinary. Our advice is to:
- Ignore the headlines
- Look a little deeper, and uncover the reality
- Keep your property portfolio under review
- Run your property as a business
Do these four things, and you won’t be panicked by sensationalist headlines. Instead, you’ll make wise decisions and better profits, no matter what the taxman throws at you.
For buy-to-let news that matters, get in touch with the team at Ezytrac on +44 0 1522 503 717. We’ll give it to you straight, without sensationalising the headlines.
Live with passion,
Brett Alegre-Wood