5 reasons why buy-to-let is getting a boost

Buy-to-let has always been seen as a safe long-term investment strategy but over the last few years, the landscape has changed dramatically. As we move our way through 2024, however, the buy-to-let benefits are once again aligning. Here are five reasons property investment should be on your radar this year.  

1. Mortgage rates are reducing

With inflation generally trending downwards, a halt to interest rate rises and stable swap rates, lenders have found the confidence to lower mortgage rates attached to buy-to-let products.   

At the end of January, Barclays joined the rate-cutting fraternity by offering lower rates to both new and existing landlords looking to borrow. In the same week, buy-to-let mortgage rate reductions were announced by Metro Bank, TSB and Coventry Building Society. 

One of the best buy-to-let rates seen in January was 3.54%, offered by The Mortgage Works - the buy-to-let arm of Nationwide Building Society. This rate was attached to a two-year fixed product at 65% Loan To Value, with a 3% fee.  

2. Landlord confidence is high

After a few years of adjustment, landlords look to have regained their confidence in the buy-to-let sector. Research by The Mortgage Lender found landlords were not only positive about their own rental activity, they were optimistic about the property market as a whole.  

When questioned, 74% of buy-to-let landlords felt confident about how the property market would perform over the next 12 months, with 27% feeling very confident. Landlords also felt buoyant about their own property prospects, with 71% feeling confident and 78% of portfolio landlords (5+ properties) feeling especially upbeat.  

A separate set of survey results also released in January revealed confidence is so high that a third of buy-to-let landlords questioned intend to expand their portfolios in 2024. The research, conducted by Together Money, also found a quarter of landlords were planning to refinance their properties to support business objectives over the coming 12 months.   

3. Better efficiencies exist if incorporating

Rather than exit the buy-to-let market completely, a growing number of landlords are finding new financial efficiencies to help offset tax implications. New data analysis has shown the number of landlords setting up limited companies to hold their investment properties is rising.   

In fact, a record 50,004 limited companies were set up by landlords in 2023 – a rise from the 48,540 registered in 2022. Interestingly, it is landlords with single properties who are driving growth, posting a 21.9% increase over the last 12 months.   

The current benefits of holding a residential buy-to-let in a limited company include being able to offset mortgage interest against the tax bill, paying corporation tax, which is currently at 19% - a levy lower than that paid by landlords operating outside a limited structure, and not paying capital gains tax when an investment property is sold.  

4. Rents set to rise 

Landlords looking to balance the books have relied on the ability to increase rents – potentially in line with inflation – and that trend looks set to continue this year. Zoopla expects rents to rise by between 5% and 8% across the country (outside London), with a 2% increase in the capital city. Affordability among tenants should be offset by a predicted faster-than-anticipated growth in earnings and inflation that is expected to dip below the Government’s 2% target in the spring.  

5. Potential positivity in the Spring Budget

With a General Election predicted this autumn, the Chancellor will use the Spring Budget on 6th March to curry favour with voters – including landlords. A positive change to Stamp Duty Land Tax (SDLT) is the talk of the finance sector, with either a revision of the current thresholds at which SDLT is paid; a reduction in the rate of SDLT or a temporary SDLT holiday the most likely options. It is less clear whether the Chancellor will cut corporation tax – the levy paid by landlords who hold properties within limited companies.   

If you would like to explore the option of becoming a landlord in 2024, or have plans to expand a buy-to-let portfolio, please give us a call to discuss your options.