Posted on Feb 18, 2019
2018 was an eventful year for the buy-to-let sector. UK rental demand remained buoyant, while investment in the north of the UK continued, presenting landlords with lucrative buy-to-let opportunities.
However, the effects of 2015’s Section 24 regulation and 2017’s stricter mortgage lending criteria also started to take hold. This meant some investors struggled to secure profitable investments, resulting in a shake to the market confidence.
In this article, we take a look at 2019 and discuss how those looking to profit from the private rented sector can succeed despite some market turbulence.
As we enter 2019, speculation over how Brexit is likely to impact the buy-to-let sector is increasing. However, while it’s true that the UK leaving the EU is likely to raise a few obstacles for landlords (something which we discuss in more detail here), Brexit will also present new opportunities.
It’s these opportunities that landlords should focus on in 2019.
The fact remains that when the UK leaves Europe, there still won’t be enough homes to meet the current demand. And it’s this overall housing shortage that will continue to prop up the rental sector in a post-Brexit landscape.
Furthermore, personal concerns around Brexit are likely to impact the market. The uncertainty around the UK leaving the EU has sparked a hesitance from would-be owner-occupiers to commit to a mortgage and buy their own property. As a result, it’s predicted that more people will choose to rent in the long and short term, providing private landlords with a lucrative opportunity.
There’s no doubt that 2017’s updated lending criteria has made it more difficult for landlords to obtain buy-to-let mortgages.
That’s why it’s crucial that landlords looking to mortgage buy-to-let property in 2019 seek professional advice. Securing expert mortgage advice in 2019 can greatly affect the level of profit generated from mortgaged buy-to-let property. Finding a mortgage advisor who understands the buy-to-let market is vital.
However, while the mortgage restrictions have pained the market, there are some positives to the new lending criteria. As amateur landlords exit the market due to the stricter regulations, serious landlords who are prepared to take the right planning precautions can benefit from a less competitive market place.
When Section 24 of the Finance Bill was introduced in 2015, it abolished mortgage tax relief for landlords. The impact of this started to affect many private landlords in 2018, denting yields and curbing profits.
However, while this new regulation has made it more difficult to generate the same levels of profit as before, in 2019 and beyond there are still ways for landlords to get the most out of their buy-to-let investments that generate good returns. One of these is to operate as a limited company.
Changing from a private landlord to a limited company is the workaround many serious landlords are choosing in order to continue seeing higher profits from their property investment. That’s because owning rental property through a limited company allows landlords to continue to claim tax relief on mortgage relief.
Furthermore, as some landlords choose to leave the private rented sector due to these new regulatory pressures, those who stay in the market and professionalise it reap the rewards.
Rental demand is growing nationwide. However, in order to get the most out of property investment in 2019, it’s crucial that landlords focus on high growth areas with the highest yields possible.
Due to historically steady rental demand, it can be tempting for landlords to invest in major cities such as London, Birmingham and Manchester. However, such property tends to cost significantly more than the UK average. Furthermore, saturating rental rates in these locations can make it hard to generate high, long term yields.
The key to successful property investment in 2019 will be to invest in smaller property “hotspots,” where property prices are low and high growth is predicted.
The north of the UK is home to many property hotspots. As numerous small commuter towns and cities benefit from huge investment, new businesses, students and young professionals are flocking in, sparking a surge in rental demand.
In addition, as part of ongoing investment, transport connections between these smaller towns and major cities are improving. This is making it easier for commuters to enjoy a more suburban lifestyle while working in major cities.
At Fitzwilliam Capital Partners, we focus on identifying UK property hotspots for our investors. We then develop quality properties that are often cheaper than the UK average. Over the last 4 years, we’ve identified and developed in some of the UK’s most up and coming hotspots, including Pontefract, Doncaster, Leicester and Sheffield, all of which have generated strong yields. Many of these areas can be found on Totally Money’s, Buy-to-Let Rental Yield Map for 2018/2019.
Despite recent unsteadiness in the buy-to-let sector, one fact remains true: Rental demand is still strong. Ultimately, this is what landlords should focus on in 2019. As long as this remains the case, there will be opportunities for landlords who offer a high-quality rental service.
The industry as a whole agrees. Andrew Montlake, of mortgage broker Coreco, told the Telegraph, “It is basic economics. We aren't building enough homes. People can’t buy, and so there is demand for rental properties and for landlords.”
If you’re a landlord already or looking to be become one by investing in property in 2019, talk to our experienced team today.
With a strong focus on property investments that deliver great returns and capital growth, we’ll work with you to make sure you achieve the highest possible returns from your property investment, in spite of any industry pressures.
So, get the most out of property investment in 2019. Contact us today to learn about how we can help you.