Savvy landlords will grasp the nettle of uncertainty and embrace the pandemic pinch
By Franz Doerr, CEO at flatfair
In the wake of the worst economic slump in three centuries and lingering uncertainty around the pandemic many landlords are, understandably, taking stock of their portfolios and weighing up whether buy-to-let is worth the hassle any more.
And while some no doubt feel they have little choice but to throw in the towel and sell up, there are a number of factors at play in the UK’s property market that should be considered before following through on any rash decisions.
Last week, a colleague of mine looking to get their first foot onto the ladder went to view a small one-bedroom flat in West London, one that was currently being rented by a young couple. The estate agent explained that the couple had given notice and the landlord — spooked by the economic fallout of the pandemic and what could lie ahead — had decided to sell instead of finding new tenants.
And who could blame them? In London, monthly rent prices plummeted by up to 34 percent last year. [1] For small mom-and-pop landlords reliant on rental income, risking a fall of a third or more in their yield could be enough to put them out of pocket.
However, it is important to bear in mind that the temporary havoc Covid-19 is wreaking on the rental market comes against the backdrop of a housing affordability crisis that isn’t going to be resolved any time soon. The Stamp Duty holiday — for better or for worse — means that property prices have hit an all-time high. That’s obviously good news for those fortunate enough to already have a firm footing on the ladder, but is hardly a cause for celebration by prospective first-time buyers who are struggling to save up enough for a deposit.
“Most of our business right now is actually coming from lettings — so many landlords are selling up at the moment”, the agent told my colleague; a clear indication that demand still exists in the rental market.
The dwindling supply of rental properties, then, should be viewed as an opportunity by those landlords who are prepared to dig in and hold their nerve throughout this period of turbulence. While others will fall at the wayside and conclude the risk isn’t worth the worry, savvy operators will grasp the nettle of uncertainty and ultimately reap the rewards. Despite the Chancellor’s lofty ambition to turn Generation Rent into Generation Buy, he is no miracle-worker. Even with five percent mortgages set to make a return, first-time buyers looking to buy in London will still need to save up £24,803[2] while simultaneously paying high rent.
Traditional landlords need only look at the continued success of Britain’s rapidly-growing Build-to-Rent (BTR) sector to be assured that demand isn’t going to dry up overnight — if institutionally backed BTR developers are betting on the rental market as a sustainable, long-term investment, then so can Buy-to-Let landlords.
