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Is buy-to-let still viable?

Until fairly recently, the phenomenon of buy-to-let seemed unstoppable. Everybody with any degree of financial nous seemed to be taking advantage of cheap buy-to-let mortgage deals to become a landlord, and then sit back and watch their investments grow. It was almost a no-brainer.


Between 1999 and 2015, lenders are said to have approved more than 1.7 million buy-to-let loans, and during that period owning a second property became a common alternative to investing in a pension. 

But then things changed. Fast-forward to 2021 and now the Nottingham Building Society estimates that 20% of buy-to-let landlords are considering selling up in the next year. A combination of the abolition of mortgage interest relief, an increase in stamp duty on second properties, the removal of the ‘wear and tear’ allowance, plus a host of new landlord regulations made the prospect of becoming a landlord if not less appealing, then certainly more complex. So has buy-to-let had its day?

Not necessarily, says Carl Burgess of Winkworth in Shepherds Bush. “With uncertainty around the world, London property has always been considered a safe haven for investors. Property ownership is considered one of the safest places to put your cash and with the rental market in London now returning to normal and rents rising again, we expect to see an increase in the number of people looking to buy properties to rent in the capital.”

In August, for instance, Winkworth’s figures show that new lettings applications were up by 31% on 2019 figures, and 33% on 2020. London property values continue to rise; buying a home in the capital remains a sound investment, even taking into account the increase in stamp duty on second homes. 

When debating whether to invest in buy-to-let, there are three main considerations: purchase price, rental yield and capital appreciation. Are you looking to make money short-term with a high rental yield, or are you prepared to wait it out until the value of the property increases significantly, and then sell up? Areas with high rental yields are traditionally those with lower property prices (currently the best buy-to-let buys are said to be in the North East), whereas investing in London property can involve a greater initial outlay and lower monthly yields, but potentially higher long-term gains as property gains in value.

At the moment there’s a lot of choice in the buy-to-let mortgage market and average rates have started to fall to lower than in July 2019, making it cheaper to borrow money to invest, and applications are increasing significantly year-on-year. A trend for new landlords to form limited companies in order to offset mortgage interest against profits is emerging in response to tax pressures on buy-to-let, and this is enabling many people to grow their portfolios more quickly. 

So clearly, buy-to-let is still with us, even if it might require a bit more thought than it did in the 1990s. Think clearly about where to buy, do your sums, shop around for a good mortgage and take the plunge. There’s no shortage of tenants, after all.

Listen to Winkworth’s latest episode of The Property Exchange podcast on the rental markets in London and the country here now, and when you’re ready to take the plunge, contact your local Winkworth agent for professional advice to guide you through the complexities of the process.


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