Against expectations, the final quarter of 2024 was a great one for the BTL market. While this may come as a surprise to some, the most recent figures back this up. The latest data from UK Finance show the number of buy-to-let mortgages granted in Q4 was up by an impressive 39%, compared to the same period in the previous year, and the total value was even higher - up 47%.
While this latest data paints a rosy picture, a few regulatory obstacles and cost challenges could threaten to impede this forward momentum. The recent changes to Stamp Duty this month are a prime example, with the buy-to-let market now bracing itself to see what the true fallout will be and whether this will further increase the exodus of smaller, amateur landlords away from the market. Our latest research into the buy-to-let market shows that more than one in ten (12%) landlords will be offloading properties this year, with 11% planning to exit the market altogether.
We would argue that the Government needs to re-think Stamp Duty in line with many UK investors. Of those who took part in our survey, nearly a quarter of landlords reported that Labour should prioritise “reducing or reforming” the tax on additional properties to prevent the loss of much-needed rental stock in the market.
That said, larger, professional landlords, for the most part, seem to have been able to absorb the costs of the higher tax. This may be through diversifying their portfolios into different property types like semi-commercial, HMOs, student accommodation, investing in social housing, or by shifting their focus to regions with cheaper property prices – and potentially higher yields - such as Manchester, Liverpool, and Birmingham.
The same perhaps cannot be said for amateur landlords, who may be outpriced due to likelihood of smaller margins and are less well positioned to shift their portfolios. This shift away from smaller landlords may not have a direct impact on the market data, as properties will be snapped up by larger portfolios and the market will continue to look healthy. But it’s a change we’d expect to see continuing over the next few months and years.
The Renters Reform Bill is also due to come into effect later this year, adding another pressure point to landlords, who will need to quickly get to grips with their new landlord responsibilities and assess any further costs they need to account for.
Specialist lenders such as Together are able to provide support to BTL landlords of all portfolio sizes and investment objectives. But the Government still needs to be made aware that adding multiple layers of financial burden in a short space of time makes life much more difficult for landlords. And by making BTL a less attractive proposition, a resulting lack of stock will only force rental prices higher, even pricing out some of the tenants out of the properties they’d formerly be able to afford through the very moves that have been introduced to protect them.
Landlords have always proved to be resilient, adapting to changes in tax and regulation over the years, but we see the current shift in favour of larger and more financially agile property investors as a fundamental change to the market – one that will need investors, intermediaries and lenders working even more closely together to seize the commercial opportunities in this new, rapidly-changing landscape.
