We need to remain optimistic. For BTL investors specifically, the coming weeks will likely take their toll.
In the lead up to the general election, there will undoubtedly be endless commentary on how dire our economic situation is, regardless of who wins.
Landlords have already been bombarded with negativity as it is. The mini budget, cost of living crisis, legislative challenges, and more, have all taken the shine off the rental market for many.
But, we must filter out the noise and separate the wheat from the chaff. While there are still plenty of challenges to overcome in the BTL market, there is actually plenty going for landlords at the moment. Also, while there’s uncertainty on the horizon, that doesn’t mean we’re devoid of options.
Currently, rents across the UK are high. They’re besieged by costs and other pressures, but they’re still rising. Average UK private rents rose by 8.9% in the 12 months to April 2024, according to the latest ONS data.
Now, the general consensus at the moment is that these rising rents don’t matter, given that costs are eating into any potential returns. Again though, this simply may not be the case for many. In Q1 2024, the average gross rental yield hit 6.1%, according to analysis from Paragon Bank. This is the highest yield seen since Q2 2018.
In certain parts of the UK, landlords may be enjoying even higher yields. Outside of the expensive hotspots of London and the South East, it’s possible to find average gross rental yields of nearly 9%.
Looking ahead, we should also be mindful of the positives circling the market. The Renters Reform Bill has been scrapped which, while leaving many questions unanswered, at least means landlords no longer need to worry about the abolishing of section 21, fixed tenancy changes, and other headaches.
What’s more, rental demand is set to skyrocket from tenants over the coming years. Meanwhile JLL expects rental growth of 18.8% between now and 2028. BTL, clearly, isn’t dead. However, while it’s right to welcome much-needed optimism, we shouldn’t let our guard down, or lose sight of what may be looming.
The general election will be happening sooner than many expected, and we know property investors are worried about this. Market Financial Solutions’ own independent research from Q1 2024 showed that roughly half (49%) of UK property investors feel the result of the upcoming election could have a negative impact on their investments. This rises to 62% in London.
Chances are, according to the polls, that we’ll have a Labour government in place by the end of Summer. How landlords feel about this will depend on a multitude of factors, and there will still be many details to iron out in the meantime. We should probably expect plenty of politicking, filibustering, and posturing over the coming weeks.
Even so, there are positives to be gleaned. It’s questionable whether the plans will come to fruition but, as it stands, one of Labour’s “Five National Missions” is to get Britain building again with planning reforms expected to lead to 1.5 million new homes. And of course, the Conservatives have their own plans for housing, should they retain power. This includes delivering 1.6 million new homes by the end of Parliament.
More supply equates to more options and opportunities for investors. In truth, no one can fully predict what will emerge from the election. All we can do is best prepare and remain flexible as changes come about.
Thankfully, the specialist finance market can help here. Since 2006, MFS has never stopped lending in the face of shifting political priorities, economic surprises, and societal challenges. We have no plans to slow down – regardless of what lays ahead.
