The team here at North Fox have seen a great deal of change in the buy to let landscape over the last 20 or so years: Government policy and regulation, cultural shifts, recessions, build to rent, serviced lets, the rise of the property seminar, the erosion of social housing and of course global pandemics. So what does the future hold for the sector and is buy to let still something you should be considering to secure your financial independence?
The veteran property minds here at North Fox have put down their cups of tea and come up with their top 5 predictions for the future of the sector for you:
- So lets start with the big one…..PRICES. Everyone had this at the top of their list. Universally everyone agreed that property prices, bar the usual dips, will continue their upward trend since the end of the Second World War. This was due to a number of factors: significant and increasing supply and demand imbalance, population increase, slow planning system, drop in new construction starts, older landlords leaving the sector driving up rents, increasing demand for good quality accommodation in cities and around universities to pick out just some of the key drivers.
- RENTS will outpace inflation over the decade. As we have talked about here previously, tenants are finding their choices very limited in areas of high demand. This is going to be exacerbated by the falling numbers of new construction starts. We feel that over the next ten years, those investors who buy high quality energy efficient property in cities are going to continue to have multiple applicants per property. This will resultantly see rents rise, constrained only by affordability.
- GOVERNMENT legislative changes will continue within the sector, some good some less so. There will likely be new EPC legislation, possible expansions of landlord licencing schemes and no doubt some changes to the tax and planning systems. It has ever been thus it seems, however we feel there is also a clear need for some level of change. Bad landlords who own damp properties in a poor state of repair need to be driven out of the sector. We also welcome the changes to the law coming on assisted living accommodation, ensuring unscrupulous developers don’t try to maximise profits by selling substandard property to unaware investors. As investors ourselves we want to continue to provide a good quality product at a good price for a good return and at North Fox that is what we pride ourselves in offering.
- PBSA (purpose-built student accommodation) will continue to be one of the most sensible investments you can make. We have written extensively about the crisis of student accommodation in the UK, so wont repeat all of that here. We believe more institutional investors will want to capitalise on the demographic changes in the UK and significant rises in student numbers. This next ten years is the decade of the PBSA boom.
- THE ECONOMY plays a significant role in the future of property investment. UK Plc’s outlook has been sluggish and is currently the worst performing country among the G7, yet unemployment remains low. The economy will grow slowly over the next few years as most world economies recover from the worst of the pandemic. Resultantly, interest rates will begin to drop as inflation is brought under control and the Government look to stimulate growth. Even now, banks are fighting for buy to let customers and bringing out new, more attractive products with tight margins. Here at North Fox it is our belief that rates will continue to be low, compared to historic norms, and will likely reduce towards the end of the year and into 2024. This will result in better returns on your property investments and with unemployment expected to remain very low, the economic climate will provide great opportunities to grow your portfolio.
The future of buy to let is very healthy, the supply and demand imbalance is getting more acute, rents are rising and the population is increasing. For ethical investors that are buying good properties in the right areas, there are excellent returns to be had, while meeting a genuine social need. Many developers only feel confident to build if they feel a proportion of the properties will be bought up, off-plan, by investors during the build process. This ultimately means there is a supply of modern, energy efficient properties built where they are needed, close to people’s places of work and public transport.
As ever if you would like more depth on any of these points, please contact one of our expert team, we would love to hear from you.
