Is buy-to-let still a viable investment in the UK?

From professional landlords to expats seeking investment opportunities, the buy-to-let market in the UK has long been a popular choice for investors seeking to grow their wealth. As of 2023, there were approximately 4.6 million BTL (Buy to Let) properties rented in the UK¹.

Traditionally, BTL properties have provided a steady income stream for landlords. The appeal of this is not only in rental income but also in the potential capital growth over time. However, recent market dynamics have prompted some investors to reevaluate the value of the BTL market.

What is causing the hesitation?

In June, the Bank of England held rates at 5.25% for a seventh time in a row². High interest rates and inflation has had a knock-on effect on landlords. Although BTL mortgage rates have shown signs of falling, they still remain higher than a couple of years ago. This means that landlords due to remortgage will likely be facing higher rates and larger repayments.

Added to this, legislation changes on BTL investments has also impacted the market. The introduction of tax credit on mortgage interest payments in 2023 and changes to stamp duty haven’t played in BTL investors favour in recent years. With a new government now in place many are waiting to see what impact this may have on the housing market, particularly if you’re a landlord.

Beyond the UK, there’s still a lot of geopolitical uncertainty, including conflicts and elections that are making investors hesitant. This year is the biggest year in election history³ with many major elections still to take place, including the US.

Time will tell on how a lot of these points will unfold and how they will impact the BTL market long term. However, the positive news is that it certainly hasn’t put a stop to the market. Over the course of this year, we’ve noticed a number of key trends in the market.

What trends have we noticed?

• Expat Interest
  Expats have shown a growing interest in purchasing BTL properties in the UK. The weaker pound has made UK real estate attractive for those earning in other global currencies.
• Foreign Nationals and UK Residents
  Beyond expats, foreign nationals and UK residents are continuing to explore BTL investments, with the allure of long-term security in property investment appearing to be driving their interest.
• Professional Landlords
  Despite noise about smaller landlords exiting the market, professional landlords with multiple BTL properties remain positive and they appear to be continuing to seek opportunities to expand their portfolios or refinance existing debts.

Is buy-to-let still a viable investment in the UK?

When the pound is weaker against some of the global currencies, such as the US dollar, many individuals – particularly those who are high or ultra-high-net-worth – view the UK as a safe investment. Bricks and mortar is generally seen as a safe and reliable investment option in the UK.

Many of our clients who are investing in a BTL property are continuing to buy in locations considered to be ‘prime areas’. These include locations such as Battersea, Kensington, Chelsea, and Westminster. These are generally considered as ‘safe investments’ as these locations tend to recover faster and remain sought after, meaning that over time, your property is likely to appreciate in value.

The BTL market continues to be appealing, particularly for expats and foreign nationals. The focus is on the Bank of England’s base rates, and we are hopeful for reductions within this year. It’s crucial for BTL investors to align their investments with their long-term objectives and to be prepared to tackle the present market challenges.

Individual circumstances vary, and seeking professional advice is important when considering BTL investments. If you have specific questions or need further details, our lending team and private bankers will be happy to help.

¹UK buy-to-let statistics 2024 (finder.com)
²Mortgage rates: How do UK interest rates affect me and when will they fall? (bbc.com)
³Why 2024 is a record year for elections around the world | World Economic Forum (weforum.org)