Falling house prices combined with the recent stamp duty holiday could provide a boost for the buy-to-let (BTL) sector, analysts are predicting.
Recent research from Halifax showed that property prices had plummeted by 12.7% in the last year, representing the first double-digit annual drop ever recorded.
By contrast, rents are proving resilient in many parts of the country, making this an ideal market for would-be landlords.
Compare buy-to-let mortgages here
Tax break open to everyone
The icing on the cake came last week when the government announced a one year stamp duty ‘holiday’ for homes worth less than £175,000, which translates into a tax saving of up to £1,750.
The government announced the move in a bid to rejuvenate the ailing property industry, but surprisingly they left the door open for property investors to benefit from the offer as well.
“It is surprising that the government has included all residential property in its stamp duty holiday, including BTL,” says Melanie Bien, director at Savills Private Finance. “I think many landlords did not expect for a moment that it would apply to them.”
Compare fixed rate mortgages here
Good time for BTL
Darren Winters, founder of investment training company WINpropertyinvesting, agrees.
He adds that, contrary to what many players in the market claim, now is actually a superb time to get into BTL, thanks to the combination of falling house prices, stable rental yields and the tax holiday.
“The stamp duty cut is not only good news for first time buyers; it's great for BTL investors as well,” says Winters. “There are far more excellent property opportunities in the UK and overseas than there were a year ago, provided you have learnt what to buy.
"There are now many tremendous bargains around as some owners are desperate to sell. For instance, I know of a property for which the owner turned down an offer from a buy to let investor of £170,000 in autumn 2007. The same investor has now acquired it for £125,000. The simple facts are that, while property prices are coming down, rents are not and there is no shortage of tenants for most decent properties.”
Compare buy-to-let mortgages here
Not for everyone though
Of course there are a lot of other factors to keep in mind. Most important is the fact that, whilst mortgage lenders are slowly reducing their rates again, competitive deals can still be hard to come if you don’t have a large deposit to put down up front. So this is most certainly not something you should look to get into without being properly financially prepared.
Indeed, Winters hastens to add that BTL is by no means a get rich quick scheme, but rather a long- term strategy. "Property is really a long-term investment and, until we have strong economic growth and a low interest rate environment, buy to let investors should not be too optimistic about price appreciation on their valuation models over the medium term,” says Winters.
“But rental income plus the chance to buy at rock bottom prices still make this a good time to invest. There is a lot of fear and panic in the property market right now among sellers so, if you going to buy, make an offer 30% to 40% below the asking price and see what happens."
Compare buy-to-let mortgages here
