September 9, 2021

The Buy-to-Let Boom

What's driving it and why it might be time to join the trend. 

Investment in Buy-to-Let properties is booming because inexperienced landlords are moving towards more professional portfolios. At the same time, professional landlords are restructuring investments to add additional homes to their portfolios. 

 

What Is Driving the Buy-to-Let Trend?

Buy-to-let refers to purchasing properties for the sole purpose of renting to tenants. Investors usually turn to buy-to-let investments when they believe they can earn high rental yields or sell properties for great profit in the near future. 

 

Buy-to-Let Options and Lower Rates

There are more than 2,700 mortgage options for landlords to choose from. Average mortgage rates are lower than they were in 2019. That is fantastic because landlords can remortgage at the end of a two-year fixed loan to benefit from lower rates. 

 

Low-Deposit Mortgages and High Returns

Loan-to-value mortgages deals of 80% are back, enabling borrowers to invest with small deposits when entering the buy-to-let space. As tenants essentially pay off the mortgages, buy-to-let has become an attractive investment. 

 

With housing prices showing rapid growth, proprietors can see a good return on investment (ROI), even with the increased capital gains tax rate (18-28%) on sales.  For instance, the average landlord who sold their buy-to-let in 2020 received £78,010 more than they paid for it, which is a remarkable ROI. 

 

 

Rental Demand is Higher 

The buy-to-let market was slow in 2021 as stamp duty cuts resulted in higher house pricing. Accordingly, the higher housing prices resulted in a record number of new prospective renters looking for properties. 

 

According to Hamptons, rental prices have grown 8.5% year-on-year throughout June 2021. The average rental price for a home in Great Britain is £1,092, following significant increases in rental costs in the South East and South West. London rentals are still the most expensive, with average rents of £1,751. As 40% of properties in the average portfolio are owned outright, landlords are taking advantage of higher rental yields. 

 

Landlords are Expanding Their Portfolios

A survey completed by Foundation Home Loans found that 30% of owners plan to remortgage over the next year to release equity, possibly towards future property purchases and higher ROI.  

 

Circumventing Tax Hikes

Recently, buy-to-let landlords felt the brunt of a 3% stamp duty surcharge and higher capital gains tax bills. Additionally, the new tax legislation threatens residential landlords with higher capital gains tax bills than other investors when they sell. Yet, proprietors can mitigate these changes by investing via limited companies to obtain mortgage interest relief. According to Hamptons, 41,700 new buy-to-let limited companies were formed in 2020. 

 

Consequently, buy-to-let is booming. While this model isn't for everyone, landlords find that bricks-and-mortar remains a solid investment choice. Complete your research to ensure your portfolio matches your investment goals.

Streamline your entire property investment journey

GetGround is the all-in-one property investment platform designed for high returns, with low effort. Built for every stage of the journey, you can find, finance, structure and sell your property investment. No matter if you’re an experienced landlord or a first-time investor - we’re here to help.

Benefit from hassle-free property investing

Discover our recent property investing articles:

20 March, 2024

Is UK buy-to-let still a good investment? Navigating a changing landscape and ways to remain profitable

Investment into the buy-to-let asset class has continuously been considered a lucrative venture. Over recent years, the landscape of property ...

29 February, 2024

What taxes do you pay as a UK limited company for investment properties in 2024?

When it comes to property investing, the way you structure your investment impacts the way you pay tax on it. If you hold your property in a limited ...

29 February, 2024

GetGround Accounting and Tax: The Service That Helps Landlords Scale

GetGround Accounting and Tax service goes beyond traditional accounting to provide a holistic solution for how landlords investing through a limited ...

Subscribe to our newsletter