It hasn’t been an easy time for buy-to-let investors over the past two-and-a-half years. First came the European Union referendum of summer 2016, an event whose result led to fears of collapsing house prices amid a meltdown in the UK economy.
We may still be waiting for this slump to happen, and is something I believe won’t occur given the scale of the supply imbalance in the homes market. But one thing is sure. The breakneck property price boom of recent decades has ground to a painful halt and is showing no clear sign of returning in the near future.
Landlord are evacuating With the stunning house price growth of yesteryear now seemingly over, a trend that had created a great number of buy-to-let millionaires, there seems little reason to take the plunge right now. With tax relief for landlords also being tightened, costs rising, and the sheer quantities of paperwork for these property owners increasing, well it’s little wonder that the rental market is in sharp decline.
This phenomenon was underlined by recent data from estate agent haart released this week. This showed the number of landlords registering to buy property over the past year plunged 37.4% on a nationwide basis.
The widening of the supply shortage in the rentals market has pushed rents up all over the country, and particularly so in London where the agency advised the average has jumped 6% over the past 12 months to a fresh record of £1,924.
Rents to keep rising? Haart chief executive Paul Smith commented: “The lack of new homes to buy has, in turn, pushed up rental prices… as Londoners scramble for rental accommodation as an alternative to buying a home.”
Smith blamed the “misguided efforts” of government to reform the property market by hiking the tax liabilities of landlords, and tipped that the cost of renting will continue rising for tenants. “Until buy-to-let taxation is relaxed, we can expect rents to rise throughout 2019,” he added.
The punitive tax changes that have hit both proprietor and renter hard in the pocket are here to stay too. Government is desperate to be seen to be helping first-time buyers get onto the housing ladder by reducing the number of homes hoovered up by the buy-to-let sector, even if in reality this is resulting in higher near-term costs for those aspiring to own their first home.
If anything, the financial and practical headaches for landlords in particular are only likely to rise in the years ahead as demand for new homes steadily booms. This imbalance makes the housebuilders great places to invest in for the years ahead, in my opinion. I for one would much rather invest in the stock market right now than to take the plunge in the increasingly-challenging buy-to-let market.
Royston Wild has no position in any of the shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.
Motley Fool UK 2019