25 Years Of Buy To Let: What Does The Future Have In Store?
Did you know that Buy To Let turned 25 in September 2021? The first buy-to-let mortgage was launched on 24th September 1996. In the last 25 years, buy-to-let mortgages have soared across the UK. Now, there are 3,031 mortgage deals available exclusively for landlords and over 2.65 million landlords in the UK.
Has Buy To Let Peaked?
This year has been a challenge for the rental market. This has led many experts to believe that the buy-to-let market has already peaked. The year of challenges include:
- Pandemic and renters unable to pay rent
- Ban on tenant evictions
- Tax clampdowns on landlords
However, landlords have also seen benefits during 2021. For some landlords, they have pivoted to potentially more lucrative short-term lets. This is through sites such as Airbnb, which has boomed during a ‘staycation’ year.
Some landlords have been able to increase their rental prices due to a shortfall in supply coupled with a high demand for rental properties in certain areas.
The Four Stages Of The Buy To Let Market
1. Rapid Growth
The buy-to-let market began 25 years ago and saw rapid growth. By 2000, the market really took off, with lenders offer a range of solutions to help landlords make smart choices with their capital. In seven years, between 2000 and 2007, the sector grew from £3.9 billion to £45.7 billion. The number of mortgages between this time period grew from 48,400 to 346,000.
2. Financial Crisis
The financial crisis of 2007 had a significant impact on the buy-to-let market, with many lenders disappearing or being absorbed by other financial services. Many mortgage providers were unable to lend and struggled to access funding. Consequently, lending dropped from £45.7 billion in 2007 to £8.6 billion by 2009. The number of loans fell to just 49,400 by 2010.
3. Recovery Period
In 2010, the buy-to-let market began to recover. However, lenders were certainly more cautious. Lending rose from £9.6 billion in 2010 to £37.9 billion in 2015. Some investors during this time were able to capitalise on lower house prices. However, the lack of mortgage options meant it was a real struggle for most prospective landlords.
4. Increasing Regulation
Following on from recovery, there was growing concern that first-time buyers were unable to compete against landlords. As a result, the government began to increase the measures to curb landlord purchases. The measures included a 3% stamp duty surcharge as well as the end of mortgage tax relief. Portfolio landlords and HMO landlords began to face stricter underwriting rules as well as additional taxation.
By 2018, the number of loans reduced from 117,500 in 2015 to 73,400 in 2018. Adding in the issues we’ve seen in the last two years makes an interesting future ahead for the rental market.
Already, landlords know that the future of renting requires increasing the energy efficiency of properties through the new EPC regulations. Currently, over half of the rental properties fall below the C rating, which means there may be costly work ahead for landlords to increase the energy efficiency of their property before the regulations come into force.