Build to Rent is still a worthy investment, despite what the headlines show
As the country braces itself for Keir Starmer’s ‘painful’ autumn budget, Flatfair explains why landlords shouldn’t be quick to panic as the buy-to-let sector is still worthwhile.
Whilst we wait anxiously for Sir Keir Starmer to deliver Labour’s autumn budget next month, trade press headlines and social media channels have been inundated with ore doom and gloom for the Privat Rented Sector (PRS). The prospect of rises in capital gains and inheritance tax would appear to have sparked a flurry of selling activity among some landlords.
The latest figures from Rightmove, the UK’s leading property selling and letting website, show that the proportion of former rental homes moving into the sales market is the highest on record – at 18% of the total. The organisation insists this does not point to a mass exodus of PRS landlords, although it does say the situation will have to be monitored for any long-term impact.
Recently, a comment from Benham and Reeves’ Marc Grundherr sparked out interest. He said if the Labour government imposed a significant tax increase on landlords, this would be another blow to those who provide vital housing stock.
He added: ‘Despite this, we’re simply not seeing the exodus of landlords that is so often reported…buy to let remains a strong investment – it’s certainly one that most take with a very long-term view and they expect ups and downs, but generally speaking, the returns are consistently good.’
Luxury apartments
The quote we have highlighted above perfectly executes our point – fundamental, rental properties in the PRS are in short supply, demand remains strong, and yields remain healthy.
Added to which the property market is changing. From the latest figures available from Uswitch, a third of first-time buyers are aged over 35, 20% are aged 35-44 and 13% are over 45. So renters are staying in the PRS much longer and individual tenancy lengths are increasing, too. This is just one of the reasons that Build to Rent has taken off so dramatically in the UK in recent years.
One example of this is just last week Legal and General, a UK leading financial services provider, announced that its Slate Yard development in Manchester was being offered as an investment opportunity with a guide price of £110million. It comprises 424 luxury apartments across three buildings and provides a gym, a residents’ lounge and co-working spaces.
The financial provider have deployed over £3billion of institutional capital into the sector in 24 schemes across 13 UK cities. Clearly, they believe there is a future in the rental market.
‘It’s all very well for the big boys, but what about the small private landlord?’ I hear you say, ‘The bureaucracy is becoming overwhelming.’
It’s true that there are political moves to introduce higher standards, warmer homes and to regulate the sector more thoroughly. But, in the long run, this can only be good for business.
Build to Rent is predominantly focused on city centres, but who is catering for the suburbs and the hundreds of small towns and villages all over the UK? Don’t they deserve a thriving rental sector, too?
And as for the bureaucracy, this is where technology comes in – it saves time and money and provides evidence of compliance.
Reduce move-in costs
As well as targeting areas that don’t necessarily offer a lot of rentals, making the cost of moving into a property cheaper could also attract people to the PRS. One way of doing this is through technology.
Not to blow too much of our own trumpet, but we have recently created a deposit programme, by partnering with some of the major UK deposit schemes, that provides tenants with the option to choose a deposit alternative if they don’t have enough money. This has been known to reduce move-in costs by £1,000 while still ensuring landlords’ properties are protected against potential damages or unpaid rent.
Meanwhile, helping people out with the cost of renting could also help get people on the property ladder – another major issue our country is facing. Research from the charity Equality Trust discovered 86% of people renting a property – over six million households – struggle to save money for a mortgage.
Overall, if our PRS moves more towards technologies and building in areas we ordinarily wouldn’t, this is a brave new world we can get behind.