It has been a difficult year for buy-to-let investors and renters alike. The Covid-19 pandemic meant that many people lost their jobs or were put on furlough leave, and as a result, many fell behind on their rent.
In normal times, a tenant could be evicted relatively conveniently. However, the government put in place temporary protections for tenants, such as a ban on evictions and a six month notice period to end a tenancy (up from the standard two months).
In addition to a range of tax and law changes that have also affected landlords over the past few years, you may be wondering, is investing in buy-to-let property still worth it?
The good news is that we finally seem to be approaching the tail-end of the coronavirus pandemic and temporary eviction restrictions are starting to lift. The ban on evictions ended at the end of May and the end-of-tenancy six-month notice period was reduced to four months at the beginning of June. The standard notice period is due to drop back to two months from 1 October for most tenants, which will give landlords much more control over how long they rent out their properties and when they can retake possession.
Covid-19 issues aside, there are still many reasons to invest in buy-to-let property, including:
Stamp Duty holiday
The current Stamp Duty holiday means that buy-to-let investors can save a substantial amount of tax money. Between 1 July and 30 September, higher rates of Stamp Duty for UK buyers on purchases up to £250,000 is at a reduced rate of 3%.
Investors should be aware that as well as Stamp Duty, landlords are affected by other types of tax, such as Income Tax on rental income and Capital Gains Tax when they sell the property. You should always seek independent financial advice before investing in buy-to-let property.
Low interest rates
Bank of England rates are at a record low to support people and businesses through the coronavirus pandemic. As a result, mortgages are cheaper than usual (particularly for lower loan-to-value mortgages) and personal savings are seeing low returns. This means, for many it may actually be a better return on investment to consider investing in property rather than letting savings sit in the bank.
As above, investors should always seek independent financial advice and speak to a mortgage broker before deciding to invest in buy-to-let property.
Returns for long-term investments
Despite tax changes over the past few years, investors who are prepared to commit to the market can still enjoy substantial returns. Average house prices rose around 10% over 2020 and major bank and mortgage lender, Halifax, recently predicted that house prices will continue to rise even once the Stamp Duty holiday is over thanks to factors such as:
- Increased consumer confidence in the market.
- Changing consumer priorities which means more people are looking to move out of cities and to homes with gardens.
As such, investors could see their investment grow significantly in value over the years. In particular, homes in the north of England are forecast to rise faster than other parts of the UK.
With the rise in house prices, there is also likely to be continued demand for private rentals. Over 2020, it was reported that rents in London dropped as tenants sought space outside cities. However, in other parts of the country, landlords are reporting that demand for rental properties remains strong and is even increasing.
Do you need advice about buying or selling buy-to-let property in 2021?
Here we’ve outlined just a few reasons why investing in buy-to-let property can still be a good investment despite the impact of temporary coronavirus measures. However, doing your research is key – there are many personal, financial, legal and tax considerations to think about before taking the plunge.
If you are ready to start your buy-to-let journey or expand your property portfolio, our specialist buy-to-let conveyancing solicitors are here to help.
We can handle all the legal aspects of your transaction on your behalf, making the process as simple, straightforward and stress-free as possible.
Get a conveyancing quote online to see how much your transaction is likely to cost, then a member of our conveyancing team will be in touch shortly.
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