Is the Buy-to-Let Bubble Finally Bursting?
Over the past year or so, the rate at which lenders are offering financial support to buy-to-let landlords has been slowing significantly. Which for the most part comes down to the fact that official UK legislation governing the buy-to-let mortgage sector has seen a near-endless array of reforms and adjustments. Things have changed radically over the past 18 months, leading some to believe that we could be looking at the long-predicted bursting of the buy-to-let bubble.
But is this really the case?
From stamp duty increases to tax relief restrictions to the strictest lending criteria seen in some time, it’s seemed for a while now that the UK has declared war on buy-to-let landlords. Newcomers to the industry and those with extensive portfolios alike have been squeezed so hard that many have been forced to exit the market entirely. Or in some cases, find themselves denied entry in the first place.
Tax changes have hit the industry particularly hard, though have at the same time been largely augmented by growing demand for quality rental properties. Not to mention, the fact that average rents across key areas of the UK continue to climb at a rapid pace annually. Successful buy-to-let business owners are still making massive amounts of money, having staked claim to a UK property market that’s becoming more and more difficult to get into.
The problem, therefore, is one that surrounds getting into the buy-to-let game in the first place. Not to mention, expanding a portfolio once through the door.
It’s because of the various tax changes and general squeezes that conventional lenders are making it increasingly difficult for applicants to qualify for buy-to-let mortgages. Where you’d usually be a shoe-in, you may now fail to qualify for so much as a second thought. Which is precisely why the market for alternative financial products and services has seen record growth over the past year or two, as conventional banks and lenders close their doors en-masse.
Secured loans, specialist development finance, bridging loans and so on – all the types of innovative and intelligent financial products that largely eliminate the usual qualification criteria. Often exponentially cheaper and more easily accessible than any traditional mortgages and loans, buy-to-let investors are finding the financial support they require from smaller, often independent lenders offering tailored financial solutions.
What the government perhaps doesn’t realise is that by making life more difficult and more expensive for landlords, they in turn have little choice but to do likewise for their tenants. Higher rents, bigger deposits and greater scrutiny of who they’ll let their properties out to in the first place. Most of the housing schemes and legislative changes introduced are supposed to be for the benefit of the public in general, by contributing to the easing of the escalating affordable housing shortage.
Unfortunately, measures like those affecting buy-to-let investors could be sending things in the exact opposite direction.