Is Now the Time to Reconsider Buy-to-Let?

Prior to the government’s decision to more or less declare war on private landlords, buy-to-let was a safe haven for investors. If not, a veritable goldmine for those who made the savviest moves. But it wasn’t to last, as sweeping tax reforms hit current and prospective landlords hard, removing much of the appeal from the sector as a whole.

More recently, Chancellor Rishi Sunak announced a temporary stamp duty adjustment. Detailed in early July, the new policy would see the threshold at which homebuyers are required to pay stamp duty increase from £125,000 to £500,000. Coupled with comprehensively affordable mortgage deals and the easing of eligibility requirements among many major lenders, things could once again be working in favour of landlords.

But does this mean that now is the right time to consider a buy-to-let investment? Or do these potential incentives for landlords simply not go far enough? Use our UK mortgage calculator to find out what kind of mortgage suits you best and the exact costs.

Sizeable stamp duty savings

In the wake of Chancellor Rishi Sunak’s stamp duty break announcement, some of the UK’s leading buy-to-let brokers experienced enormous spikes in both website visits and client inquiries. Likewise, both Strike and Zoopla reported increases of up to 15% in the number of people looking to buy homes or considering buy-to-let investments.

The prospect of saving thousands of pounds on stamp duty apparently piqued the interests of once-reluctant investors.

It’s important to note that landlords will still be required to pay a flat 3% surcharge on buy-to-let properties. This means that on a £300,000 investment property, the usual stamp duty of £14,000 would be reduced to a much more manageable £9,000.

Meanwhile, many lenders have begun both reinstating their buy-to-let mortgage products and improving the competitiveness of their deals. Qualifying is becoming easier, and buy-to-let products are currently available with rock-bottom interest rates, making them an appealing prospect for those who act fast.

Particularly in key locations outside the capital, the North West, for example, has seen year-on-year rent price gains for June of more than 5%.

Ongoing uncertainty

Unfortunately, landlords and private renters alike are being forced to contend with a period of ongoing and indefinite uncertainty. Potential job losses and income reductions in particular are prompting movers and investors alike to think twice about making any major decisions for the time being.

Hence, basing buy-to-let investment decisions purely on stamp duty reductions isn’t considered advisable by most real estate experts.

A number of mortgage business owners feel that many will jump at the chance to pick up investment properties before the offer expires, while stating that buy-to-let can still be a valuable vehicle for those who get it right.

“Landlords will rush to buy homes before the stamp duty holiday ends in March next year, after which I think there will be a natural drop in activity,” he said.

“The UK is bracing itself for a slowdown in the economy, so I think it will be 2022 before the market rebounds again, assuming the taxman has no more nasty surprises.”

“It may never be the golden goose it once was, when amateur investors made easy money, but for the professional landlord, buy-to-let is still a profitable venture.”