Will post-lockdown be a good time to invest in buy-to-let?

Along with so many other industries, the housing market has taken a battering over the last few months.

The property sector had been looking the most buoyant it had for a while after shaking off its Brexit woes. But then came the coronavirus lockdown, and the housing market stalled.

But while it has taken a blow, the buy to let sector shows signs of bouncing back quickly. With demand growing, lending rates low and the sales market likely to remain sluggish, could post-pandemic be the ideal time to dip your toe in the BTL sector or expand your portfolio?

An assured investment

These are uncertain times. Although we are yet to feel the full force of the economic blow the pandemic is set to deliver, experts predict a once in a generation recession is around the corner.

But bricks and mortar remain a relatively safe investment even in turbulent times and rents are unlikely to fall as much as sale values even in stormy economic waters.

On the whole, property sales in most of England are rebounding to pre-lockdown levels, but not all areas are resurgencing quite so enthusiastically.

Now could be a good time to pick up properties with higher yields, but be cautious – areas that once had a booming rental market, student towns for example, may have been particularly hard hit by lockdown and may remain so for the foreseeable future.

A shortage of rental stock

Rents did fall slightly during lockdown, with rents on renewed tenancies dropping by 0.5% year-on-year across Britain in March to £928 per month – the biggest fall since February 2014.

While rental income is likely to remain stagnant in the short term, evidence suggests the market will pick up.

Demand for rental property largely outstriped supply across most of the country pre-lockdown and this imbalance is likely to continue – with some experts predicting the disparity will become even wider.

But this is not a given – before taking the plunge, landlords should be aware of the local conditions in the area they are looking to buy: some places will see stock shortages, while others will see a glut of properties.

Consider what tenants want in the ‘new normal’

The UK will emerge a different place post-lockdown and it would be wrong to assume that the priorities of tenants have not shifted along with so much else.

Pre Covid crisis, homes of multiple occupancy (HMOs) often granted the greatest yields. But in this new world, living in close proximity with a group of people, often strangers, is likely to be less desirable than ever.

Plus, in light of the pandemic, licencing requirements for multi-let accommodation, such as HMOs and student lets where there are shared bathrooms and communal spaces, may be subject to further regulation.

House prices in some areas, including London, remain below March 8 figures, an indication, some say, that buyers are seeking properties outside the capital, as work-from-home policies may leave many more employees no longer needing to commute into the city.

They may also be looking for more space and access to a garden; property searches during lockdown down found outdoor space had become highly coveted.

A far higher than usual number of renters whose tenancies were up for renewal in March decided to stay put in the wake of the crisis fuelled by concerns over jobs and earnings amid the continued Covid-19 lockdown. But once lockdown ends, experts believe there will be an uptick in people looking to move, perhaps bored of their four walls or wanting a different time of property.

Be alert for what the future holds

Landlords may be the first to bear the brunt of the inevitable tax burden the government will need to pass onto the country as it seeks to recoup the billions injected into the system to prop up the economy. These additional costs could chip into your yield considerably.

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3rd July 2020