Buy-to-let landlord numbers are plummeting! But rents are rising… what’s going on?

The number of people participating in buy-to-let is falling off a cliff. Royston Wild explains why.

The content of this article was relevant at the time of publishing. Circumstances change continuously and caution should therefore be exercised when relying upon any content contained within this article.

When investing, your capital is at risk. The value of your investments can go down as well as up and you may get back less than you put in.

Read More

The content of this article is provided for information purposes only and is not intended to be, nor does it constitute, any form of personal advice. Investments in a currency other than sterling are exposed to currency exchange risk. Currency exchange rates are constantly changing, which may affect the value of the investment in sterling terms. You could lose money in sterling even if the stock price rises in the currency of origin. Stocks listed on overseas exchanges may be subject to additional dealing and exchange rate charges, and may have other tax implications, and may not provide the same, or any, regulatory protection as in the UK.

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More.

It hasn’t been an easy time for buy-to-let investors over the past two-and-a-half years. First came the European Union referendum of summer 2016, an event whose result led to fears of collapsing house prices amid a meltdown in the UK economy.

We may still be waiting for this slump to happen, and is something I believe won’t occur given the scale of the supply imbalance in the homes market. But one thing is sure. The breakneck property price boom of recent decades has ground to a painful halt and is showing no clear sign of returning in the near future.

Landlord are evacuating

With the stunning house price growth of yesteryear now seemingly over, a trend that had created a great number of buy-to-let millionaires, there seems little reason to take the plunge right now. With tax relief for landlords also being tightened, costs rising, and the sheer quantities of paperwork for these property owners increasing, well it’s little wonder that the rental market is in sharp decline.

This phenomenon was underlined by recent data from estate agent haart released this week. This showed the number of landlords registering to buy property over the past year plunged 37.4% on a nationwide basis.

The widening of the supply shortage in the rentals market has pushed rents up all over the country, and particularly so in London where the agency advised the average has jumped 6% over the past 12 months to a fresh record of £1,924.

Rents to keep rising?

Haart chief executive Paul Smith commented: “The lack of new homes to buy has, in turn, pushed up rental prices… as Londoners scramble for rental accommodation as an alternative to buying a home.”

Smith blamed the “misguided efforts” of government to reform the property market by hiking the tax liabilities of landlords, and tipped that the cost of renting will continue rising for tenants. “Until buy-to-let taxation is relaxed, we can expect rents to rise throughout 2019,” he added.

The punitive tax changes that have hit both proprietor and renter hard in the pocket are here to stay too. Government is desperate to be seen to be helping first-time buyers get onto the housing ladder by reducing the number of homes hoovered up by the buy-to-let sector, even if in reality this is resulting in higher near-term costs for those aspiring to own their first home.

If anything, the financial and practical headaches for landlords in particular are only likely to rise in the years ahead as demand for new homes steadily booms. This imbalance makes the housebuilders great places to invest in for the years ahead, in my opinion. I for one would much rather invest in the stock market right now than to take the plunge in the increasingly-challenging buy-to-let market.

Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be assessed. Consider taking independent financial advice.

Royston Wild has no position in any of the shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

More on Investing Articles

Investing Articles

My ISA is ready for a 30% penny stock crash on 30 October!

Investors in AIM-listed small-cap and penny stocks could be in for a fright later this month when the budget is…

Read more »

Road trip. Father and son travelling together by car
Investing Articles

Where will the Tesla share price go next? Here’s what the experts say

The Tesla share price has been going pretty much sideways since 2021, and its robotaxi event hasn't had much of…

Read more »

British Pennies on a Pound Note
Investing Articles

Can this 8%+ yielding penny share maintain its dividend?

Our writer holds this penny share and likes its yield of over 8%. But recent business performance has made him…

Read more »

Dividend Shares

How I could make a 10% yield via dividend shares for a juicy second income

Jon Smith explains how he could build a diversified portfolio of stocks with an exceptionally high yield for his second…

Read more »

Passive and Active: text from letters of the wooden alphabet on a green chalk board
Top Stocks

5 top ETFs Fools own in their Stocks and Shares ISAs

Do you own any ETFs in your Stocks and Shares ISA? Here, five Fools reveal why they have positions in…

Read more »

The flag of the United States of America flying in front of the Capitol building
Investing Articles

Is it madness to buy the S&P 500 now?

The S&P 500 has been on a tear for many years. But a (very) frothy valuation leaves our Foolish writer…

Read more »

Two white male workmen working on site at an oil rig
Investing Articles

The Shell share price could rocket past 3,000p, analysts claim, if oil heads for $300

In today's uncertain times the Shell share price could go anywhere, in any direction, says Harvey Jones. But he still…

Read more »

Investing Articles

What’s going on with the easyJet share price?

Harvey Jones is impressed by the strong recovery in the easyJet share price over the last couple of years. Now…

Read more »