Optimistic or pessimistic about buy to let investing?
In recent months there have been contradictory headlines about the buy to let market. Some media are pessimistic, saying that there is a mass exodus by landlords from the buy to let, whilst other headlines are more positive declaring that buy to let remains a solid type of investment.
It is true that buy to let lending fell by 19% in June compared to the same period of 2017, but this should not be interpreted as a mass movement of landlords leaving the market as some media have interpreted these figures. The data can be more optimistically interpreted as the majority of landlords have not left the buy to let investment market.
A decrease in the tax relief on buy to let mortgage interest payments, increased stamp duty and stricter lending rules may explain the 19% drop in mortgage applications. What the figures do not show is the ways that landlords have adapted their business model to cope with increased costs. Many landlords have formed limited companies to decrease their tax liability. Others have diversified their property profile to include commercial and semi-commercial property.
To stimulate new property purchases some lenders have reduced their interest rates for commercial mortgages, including buy to let mortgages.
Despite the increased costs of running a buy to let business, property in the right location can generate decent rental yields and capital growth. Compared to many other investment strategies, a buy to let business can generate healthy profits.