The buy-to-let market has become increasingly frustrating for landlords in recent years. The phasing out of buy-to-let tax relief, combined with a ban on letting fees, deposit limits and a raft of other regulations, caused many to consider whether to invest. This hesitation naturally became heightened during the lockdown as, although the property market didn’t stop, many landlords paused expanding their portfolios.
However, as some of the restrictions imposed during the pandemic lift, green shoots have emerged for the buy-to-let market. In fact, there was a mini boom when the property market ‘re-opened’ in mid-May, as the pent-up demand from a previously busy market came flooding in. Many experts across the UK are predicting a boom in demand over the coming weeks and months, which will result in soaring demand for rental properties and a spike in average rents.
An increase in rental demand
Since lockdown eased and property viewings returned, there has been a spike in tenants looking to move across the country. The rental market looks to not only be getting back up to its pre-coronavirus levels in terms of tenants seeking homes, but actually surpassing it. According to Rightmove, overall rental requests are at a record high, with lettings enquiries to agents up 40% higher than July 2019.
Interestingly, the pandemic has also changed many tenants’ requirements for a home. Since lockdown, a lot of people are now looking for bigger homes with gardens and a separate space to work from home. Houses are also rising in popularity over flats. There is also a rise in those looking to move out of cities: 52% of London residents, 50% of Birmingham residents and 46% of those who live in Bristol have searched for property elsewhere in the past few months.
But at the same time, the supply of rental homes is lagging behind tenant need, with the number of new rental listings currently 4% lower than this time last year. This has also led to rising rental price pressure across the board, as asking rents outside London hit a record of £845 per month, up 3.4% on the same time last year, the highest annual rate since Q2 2016. This is only likely to continue unless more properties are added to increase supply.
The rental sector will grow greener
Tenants are also seeking energy efficient homes and the benefits they bring, such as an improved quality of living and a potential reduction in fuel bills. Good news, then, that the Government will fund up to two-thirds of the cost of home improvements of over 600,000 homes, supporting over 100,000 jobs in green construction. The £2 billion Green Homes Grant will help homeowners and landlords in England to pay for green improvements to properties, such as wall and loft insulation, draught-proofing and double glazing.
With applications for the scheme opening in September, landlords should take advantage of the funding at the same time as the reduction of stamp duty. The scheme will help reduce greenhouse gas emissions and improve conditions and utility costs for tenants living in their properties, while also saving landlords money and increasing the value on their investments.
A great window of opportunity
Following the boost that the summer statement has given the property sector, now is a great time for investors to enter the buy-to-let market. Those looking to expand their property portfolios should start now to benefit from the savings the stamp duty holiday and the Green Home Grant will provide. With house prices and demand on the property market set to rise – and already increasing – those looking to invest should do so in the next few months to benefit from the current prices and savings. Investors should also aim to avoid a long chain, which may impact purchase time.
There is no doubt that the stamp duty holiday is a great window of opportunity for investors to save thousands over the next few months. And as landlords return to invest, we will see increased green shoots in the buy-to-let sector, boosting the rental market overall.
By Michael Cook, National Lettings MD, LRG