Current Status of Buy-to-Let Market

According to property experts most of the buy-to-let investors are seeking greener pastures and prefer investing in commercial property. Traditional residential property seems to be losing its charm, and shops, office complexes and restaurants seem to be more lucrative investment options. Most of the landlords living abroad are disposing off their buy-to-let properties, especially in the London area. Ownership of buy-to-let properties has come down drastically from 26% in 2010 to a dismal 11% currently, and is fast declining to single digit figures.

However, though overseas investors are hesitating to invest in buy-to-let properties, Britain-based investors are showing keen interest in investing in buy-to-let properties, which is keeping the prices somewhat stable for now. One major reason why foreign-based investors are fighting shy of investing in properties in the U.K. is stringent tax regimen, particularly the capital gains tax, which is a deterrent.

Although Brexit triggered a fall in the value of the sterling, foreign investors were not too keen on investing in property. There was a sharp drop in property prices post Brexit, but there were hardly any takers, especially in the buy-to-let segment. The changes brought about in the stamp duty have escalated the costs of investing in buy-to-let properties. Even owner-occupied properties did not seem to be lucrative enough to attract buyers. Looking at the buy-to-let segment alone, the decline in the number of purchases is quite alarming, what with the “additional property” stamp duty playing spoil-sport, the number of properties being bought and sold has steadily declined since April 2016.

Most of the Britain-based investors are not cash rich and all have mortgage payments to contend with. With returns from property plummeting, default in mortgage payments is a regular occurrence. However, investing in commercial property is a different ball game altogether, and the segment is attracting more investors than ever before. The commercial property range includes small garages (easy to rent out) commercial buildings and sprawling industrial estates that house a wide range of factories.

The main attraction with commercial properties is the higher return on investment, though the appreciation of commercial property is much lower than that of buy-to-let properties. Moreover, the tenants in commercial buildings do not make a fuss about amenities and go ahead and spend out of their pockets if they need small improvements. The business-folk take care of the insurance premiums and minor repairs as well. This trend is expected to continue for a while, until the next boom in buy-to-let property comes.