It’s not been an easy couple of years for investors in the buy-to-let sector. Faced by a blend of rising regulation, increasing costs, stagnating rental growth, and an uncertain outlook for home prices, landlords have faced the dilemma of cashing out or holding out for a possible upturn in the market.
Things were hard in 2018. But things threaten to get even worse this year. According to Landbay, rental growth outside of London is at its slowest since February 2013, at 1.11%. The report led the chief executive of the buy-to-let platform, John Goodall, to proclaim that “falling rents in London have masked relatively strong growth in the rest of the UK since the Brexit vote, but we are now firmly in the midst of a nationwide rental growth slowdown.”
News from the Bank of England was a mixed bag, meanwhile. On the plus side, the bank’s decision to keep interest rates on hold at 0.75% has dulled expectations of serial rate hikes this year, good news for those on variable mortgage products fearing increasing costs. The bad news is that Threadneedle Street is predicting that the UK economy in 2019 will grow at the slowest pace since The Great Recession a decade ago.
Political problems
Added to this, reports have emerged from Westminster in recent days that the Brexit-related political malaise could lead to a general election as early as June.
Attempts to curry favour with voters caught in ‘the rental trap’ has prompted the Conservative government to step up regulation of buy-to-let and reduce tax relief for landlords. Things would likely get even worse should a Labour government seize power in the summer, though, with some of the possible implications being the introduction of longer tenancies and rent caps.
We can’t talk about politics without talking about Brexit. I remain convinced that leaving the European Union without a deal is a highly-unlikely scenario, given the fierce social, economic and political backlash that this would likely bring. That said, we continue to creep closer to that March 29 exit date without a deal, and a breakthrough with our continental partners doesn’t appear to be any closer.
8% yields!
Why, then, would anyone gamble with buy-to-let investment at the present time,? Especially as there’s a galaxy of great shares that don’t carry the colossal uncertainty, not to mention the low returns, that landlords have to deal with.
I’d much rather scour the FTSE 100 for some splendid dividend shares to furnish my investment portfolio with. Vodafone Group (LSE: VOD) is one such share I’d be happy to buy today, a share with an extremely bright long-term outlook.
The telecoms titan may be experiencing a sales slowdown at present, but demand in emerging markets remains strong. This drove organic service revenues (excluding Europe) 4.9% higher in the three months ending December. Competitive troubles in some regions such as South Africa has dented growth more recently. But my belief that Vodafone can ride the wealth boom in developing markets and enjoy strong profits growth from data-hungry consumers remains unchanged.
City analysts agree. They expect the Footsie firm to flip back into strong profits growth immediately following the fall expected in the year to March 2019. Recent share price weakness makes now a great time to load up on Vodafone, in my opinion, and its gigantic 8.4% forward dividend yield providing an extra sweetener.
