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The rise and rise of buy-to-let

3 Apr 2018

This article first appeared in Moneyfacts

Buy-to-let investment has been written off again and again, often being described as a dinner party obsession of the past. But the British love of property investment means that many gatherings are still illuminated by excited discussion about rising house prices counterbalanced by moans about difficult tenants.

But the British love of property investment, fuelled by high demand and limited supply of new homes, means that many gatherings are still illuminated by excited discussion about rising house prices counterbalanced by moans about difficult tenants.

Because whether the government raises taxes in the form of a 3% Stamp Duty levy, adds new stress tests for home loans or ends mortgage interest tax relief, the buy-to-let market in the UK just keeps powering ahead.

Research published in April property adviser Ludlow Thompson shows that Britain now has a record 2.5 million buy-to-let investors, with signs that renewed optimism about the UK’s departure from the European Union is now spurring buyers ahead.

Ludlow Thompson argues that a `softer’ Brexit and a transitional period before Britain leaves the EU are giving investors the confidence to venture back into the buy-to-let market after a two year hiatus.

What those investors will find, however, is a marked difference in the buy-to-let lending world.

This is because the majority of high street lenders have now restricted their buy-to-let lending, adopting a tick box mentality which limits the options of first time landlords, people buying outside London and the south-east, people buying mixed use properties and portfolio landlords.

At Octopus Property, however, we embrace the opportunity to work with these landlords – after all, how does anyone get started on buy-to-let without having been a first-time landlord?

Likewise, we see the potential in mixed use property. For example, some of the best investments comprise a shop on the ground floor and flats above – but lenders like us are willing to roll up our sleeves to understand these more complex opportunities.

We also see opportunity in Houses in Multiple Occupation across the country – perhaps let to students or young professionals who nonetheless provide a strong and stable income stream.

Even in London we are seeing the financing options narrowing for buy-to-let investors, with high street lenders demanding a deposit large enough to justify a 50% Loan to Value ratio, while alternative lenders can offer a wider range of options.

What are the prospects, then, for buy to let investment and finance for the rest of 2018?

Brexit uncertainty is likely to keep a lid on interest rates, and against this backdrop we don’t see high street lenders loosening the purse strings any time soon.

This means we are being approached by more and more mortgage brokers and Independent Financial Advisers keen to introduce clients to the buy-to-let market, as it dawns on them too that the sector is continuing to thrive. The fundamentals continue to be strong for buy-to-let, with housing demand high and nowhere near being matched by homes built for sale. Buy-to-let will continue to be a dinner party talking point for many years to come.

For journalists in their professional capacity only. Personal opinions may change and should not be seen as advice or a recommendation. We do not offer investment or tax advice. Issued by Octopus Property. Octopus Property is the trading name of Bridgeco Ltd (Reg No 6629989), Fern Trading Ltd (Reg No 6447318), Nino Ltd (Reg No 9015082), Octopus Property Lending Ltd (Reg No 7531926) and Octopus Co-Lend Ltd (Reg No 8913299), Registered Office: 33 Holborn, London EC1N 2HT, registered in England and Wales and Dragonfly Finance S.ar.l. (Reg No B189290) Registered Office: Parc d’Activité Syrdall, 6 Rue Gabriel Lippmann, L-5365, Munsbach, Luxembourg registered in Luxembourg. Octopus Property Lending Ltd and Octopus Co-Lend Ltd are authorised and regulated by the Financial Conduct Authority. Issued April 2018.