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MAIL ON SUNDAY - Is buy-to-let in crisis mode?

Journalist: Sarah Davidson, Freelance

ended 13. June 2023

Rates rising, product repricing, criteria, affordability, rent inflation, etc etc etc

  1. Are landlords in crisis? 
  2. What are the reasons some landlords are struggling?
  3. Are any landlords coping?
  4. How are the successful landlords coping? 
  5. What should landlords do if they want to continue making a profit on BTL long-term? Specifics please for a private landlord retirement planning with two properties; a portfolio landlord with 10+ properties in a ltd company; a first-time landlord.
  6. Is this mess a blip or a trend? 
  7. Five short, snappy tips to futureproof your BTL profitability.

9 responses from the Newspage community

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Editor
Samuel Mather-Holgate
Independent Financial Adviser at Mather and Murray Financial
Buy to let has been in free fall since Osbourne left as chancellor. Tax change after tax change has made it harder for landlords to make any money. Now they are having to incorporate to try and make money and this adds layers of bureaucracy, not what landlords are renowned for. Higher rates, partly caused by government incompetence, adds costs and reduced profits further and a migration policy pushing out high skills and attracting those on lower wages incentives landlords to behave badly. Landlords are trying to sell up, but they are trapped by market that is keeping them where they are. All in all, the government have let landlords down, more so they have let those renting down and anyone who owns a home.
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Justin Moy
Managing Director at EHF Mortgages
Some landlords will be in crisis definitely, typically those with 1 or 2 properties, especially those we call Accidental Landlords who just used Buy to Let as a means of breaking a property chain many years ago. Those are not run as a business, so when the monthly profit is wiped out by higher mortgage rates, then the reflex move is to sell. Those experienced landlords with larger portfolios will have a natural spread of profit and mortgage product expiries, so the effect is not as severe. They will also be ready to buy those properties from those accidental landlords too, especially if the prices are challenged. Those planning on becoming a landlord will need a significant deposit to make the affordability work, probably a minimum of 35-40% on today's rates. Those with portfolios will see some belt-tightening naturally but will ride out the short-term position.
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Riz Malik
Independent Financial Adviser at R3 Wealth
Landlords planning to refinance in the remaining part of 2023 are in for a surprise, especially those who previously borrowed up to 75% of the property value. Currently, the focus should be on resilience for those intending to weather this storm. It's crucial to begin exploring your financing options sooner rather than procrastinating. If you require guidance, find a broker well-versed in the buy-to-let market especially if your lender does not offer product transfers.
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Michelle Lawson
Director at Lawson Financial
Yes, Landlords are definitely struggling. Since Section 24 was introduced removing landlords the option to deduct their running costs such as mortgages, fees etc this has had a significant impact. Now with interest rates rising this is exacerbating the rental market as rents are having to rise as an unintended consequence. The only people that can end a tenancy are the tenant or the Court and tenants are being advised to sit tight and wait for court action where a Landlord has served a notice. This has caused an overload in the court and bailiff system. Landlords are losing a lot of money in unpaid rent, property damages etc. For Landlords to make a profit they really need to look at their running costs versus the rent coming in and then factor in rises and also they should seek advice from Tax Accountants to ensure they are. I think this is all a blip for now and calm will ensue eventually but get the maximum market rent you can and be on top of legislation and regulation.
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Scott Taylor-Barr
Principal Adviser at Barnsdale Financial Management
Buy-to-let investing is a long-term commitment with lots of legal responsibilities placed on you as a landlord; so understanding both of those fundamentals is key. Buy-to-let is not a get-rich-quick scheme or a way to make a fast buck. However, a well-planned and thought-out strategy can be both financially and socially rewarding; you can potentially benefit from a profit via the rent, capital gains from house price growth and all whilst providing a home to someone. The key to all of this is the quality of the tenant; a good quality tenant is worth their weight in gold, and a poor tenant will cause you to stress and cost you money, so my top tip is to invest in researching and vetting any potential tenants in the first instance. Possibly a surprising top tip from a mortgage broker, but in any of the situations I have seen a buy-to-let go really wrong, it has always started with a problem tenant.
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Clive Read
Owner at Goldmanread
1) Yes buy to let is facing an existential crisis.
2) due to rising mortgage rates, increase taxes and increasing regulatory requirements ie both greater protection/ rights for tenants and green building regulations.
3) It depends how highly geared they are and how much cash they have in the bank.
4) By fixing their mortgage, increasing rents and where possible paying down debt.
5) I’ve only got 1,000 words! Contact me for more info on this question
6) This is a trend. Buy to let in its current form is in long term decline. It will be replaced by large corporate investors who are only interested in high end, professional tenants,
7) fix your rate, use tax planning, increase your rent, pay down debt where possible, build up cash savings
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Ashley Thomas
Director at Magni Finance
it's a tough market for BTL investors. However, most of them are increasing rent to reduce the loss of income. Ultimately, tenants will be hit as hard as the investors, or perhaps more with the knock-on effect of the rate increases.
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Graham Cox
Director at Bridging Hub
There's still plenty of interest in Buy-to-let property investment. But the BTL gravy train is probably over, with only the more professional landlords making it work financially. Investing via a Special Purpose Vehicle (SPV) Limited Company has tax advantages that can make property investment more profitable.

That said, the private rented sector has really become a surrogate for social housing over the past couple of decades. Which, with rents soaring, is proving disastrous. People are increasingly being priced out of putting a roof over their head. A massive program of social house building is desperately needed.
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Rob Gill
Managing Director at Altura Mortgage Finance
Buy to Let is a business and all business experience cycles. At the moment buy to let is going through a very tough point in the cycle due a combination of higher mortgage rates, increased costs, ever toughening regulation and higher taxes. On the other side, rents are also increasing, reaching record levels in parts of the country, and demand for rental property remains strong. As with any business, landlords who remain focused, and are well-organised and with a close eye on their finances will weather the storm and be well set to take advantage as the market recovers.