Don’t plan a buy-to-let funeral – Build to Rent could actually herald a rebirth
Is buy-to-let an endangered species? Is it already extinct? Property investment activity has been gathering pace for some years but fears persist that we have passed the peak.
Figures from Paragon issued in 2014 showed that the private rental market in 1994 contained ‘tens of thousands’ of landlords. Fast forward to today and there are more than 2 million private landlords owning in excess of 5 million buy-to-let properties. If you plotted the growth on a chart, you’d see that the number of landlords has steeply increased year-on-year since 2002.
Speculators, however, are suggesting we have reached the top step of buy-to-let – the stair of despair – with the industry peering into an abyss following the new 3% second home stamp duty levy and a duo of less favourable tax relief measures. While amusing tales of all-night shifts in estate agencies and conveyancing firms during the last week of March filled the property pages, they have been replaced by stark warnings about the dumping of property stock by landlords, constricted rental supply, rising rents and alarmingly silent phones post 1st April. The timing was no fool’s joke.
I’ve tried to read every scrap of coverage and every online article to see what my fellow property experts make of buy-to-let’s current and future state of health. What startled me was the oversight of Build to Rent. Much emphasis has been placed on the exit of landlords from the PRS (leading to less choice for tenants) and the projection that remaining landlords will hike rents in order to cover rising costs. Even The Daily Telegraph and the Financial Times chose not to report about the biggest PRS initiative since the 1988 Housing Act.
Quite the opposite might happen in the buy-to-let market. There’s potential for a deluge of rental properties, with more than 30,000 Build to Rent units already under construction or with planning permission in London alone. Essentially there will be increased choice for tenants and competitive (perhaps even lower) rents. What’s more, there should be an abundance of business opportunities for letting agents and property managers who market themselves to REITs, funds and organisations involved in Build to Rent. It’s not the end of a buy-to-let peak – it’s the start of a new one.