What are the current trends in the buy-to-let market?

"Landlords have weathered an unprecedented storm"

What are the current trends in the buy-to-let market?

The buy-to-let market over the past few years has not only been impacted by the likes of COVID, the cost-of-living crisis and sky high rates, but government regulations and restrictions too.

So, how is the buy-to-let market performing at present and what are the current trends in the marketplace?

How is the buy-to-let market performing?

Kundan Bhaduri (pictured left), property developer and portfolio landlord at The Kushman Group, said over the past 18 months, landlords have weathered an unprecedented storm, grappling with a relentless barrage of challenges.

“The surge in interest rates, suffocating red tape, flip-flopping on Energy Performance Certificates (EPC) requirements, and a tightening web of restrictions on possessions has left a lasting impact on the buy-to-let landscape,” he said.

The market’s vitality, Bhaduri added, is linked to the ebb and flow of mortgage rates, which, as observed, have fluctuated like a rollercoaster throughout the year.

Bhaduri said that a recent report from CBRE underscores the magnitude of the challenges faced by landlords and tenants alike, revealing the sale of approximately 400,000 rental homes lost in the Private Rented Sector (PRS).

“Rising costs, burdensome tax implications, high product fees, and the unpredictable fluctuations in mortgage rates have prompted some landlords to exit the market,” he added.

However, Bhaduri said, for those with a strategic eye on the medium-to-long term, the current conditions may present an opportune time to enter the market.

Softening property prices, a downward trend in mortgage rates, and a consistent rise in rents, he said, collectively contribute to the attractiveness of buy-to-let investments.

“Despite the scars left on the landscape, the potential for strategic investors to navigate and capitalise on these conditions suggests a silver lining amid the challenges faced by the buy-to-let sector,” Bhaduri added.

What are the current trends in the buy-to-let market?

Jack Tutton (pictured right), director at SJ Mortgages, said the landscape of the buy-to-let market in 2023 has been characterised by significant struggles, primarily stemming from the implementation of higher stress rates by lenders.

This shift, Tutton said, has posed challenges for landlords, making it difficult for them to secure new purchases or engage in remortgaging on a like-for-like basis.

“In response to this, many landlords we work with have found themselves constrained to stick with their existing lender and opt for a product transfer whenever it is available,” he added.

Lenders, recognising the strain on the market, Tutton said, have sought to provide support through the offer of reduced rates.

However, he said that these seemingly favourable rates come with a notable caveat - significant arrangement fees.

“Regrettably, we have observed that the high fees associated with these reduced-rate offers often outweigh the benefits for clients, deterring them from pursuing such mortgage options,” Tutton said.

The beacon of hope on the horizon, Tutton said, lies in the anticipation of a decrease in the overall cost of borrowing.

The expectation, he added, is that as the cost of borrowing decreases, this reduction will be mirrored in more appealing mortgage products.

Looking ahead, Tutton said this potential reduction in the cost of mortgages could breathe new life into the buy-to-let market.

“It holds the promise of creating a more favourable environment for landlords, enabling them to navigate new property acquisitions and remortgage decisions with renewed optimism and financial viability,” he said.

Anticipated reduced rates, Tutton said, hold the potential to inject renewed vitality into the buy-to-let market in 2024.

What are the current trends facing the buy-to-let market at present? Let us know in the comment section below.