The coronavirus pandemic has had many unseen consequences. A year ago, we couldn’t have imagined that London would no longer be the hub of activity it once was. A shift towards remote working, increasing property prices and decreasing rental rates have had a significant impact on the buy-to-let market in the capital.
According to CIA Landlord’s annual report, only six out of 33 London boroughs will prove profitable for landlords in 2021.
What impact has coronavirus had on buy-to-let in London?
It used to be that if you could afford a property in London, then you would be onto a sure thing. The unwavering popularity of the capital as a hub for most industries meant that as a landlord, you were secure in the knowledge there would always be demand.
It has taken a global pandemic to disrupt the order of things. The coronavirus pandemic has resulted in a seismic shift towards home working. And a significant percentage of office workers want this to be the norm going forward. And now, many are starting to look outside of the capital for a place to live.
As a result, London’s profitability for landlords has decreased by a whopping 48% since January 2020, according to CIA Landlord.
However, landlords still need to pay their monthly mortgage costs, monthly fees for maintenance and letting agency fees, averaging £1,134 per month in 2021. But as Londoners move away from city rentals, the market is rapidly becoming unprofitable for buy-to-let investors.
What does this mean for buy-to-let investors in the future?
A buy-to-let property can provide a nice little stream of income if planned correctly. As with anything to do with finance, doing the research and considering market trends can make a big difference to the success of any venture.
Coronavirus, the stamp duty holiday and fluctuating house prices have all led to uncertainty in the buy-to-let market. In reality, these changes have meant that location has become an even more important factor when choosing a buy-to-let property.
Whereas central London used to offer the highest potential, the pandemic has meant that areas such as Brighton, Bangor, Portsmouth and Leeds are now the most profitable in the country.
What do you need to consider as a landlord?
Becoming a landlord is not just a case of sorting out a buy-to-let mortgage. There is a long list of things to put in place in order to make it a profitable venture.
In terms of cost, there are required annual fees to consider, such as tenancy deposit registration, landlord insurance, energy performance certificates and gas safety certificates.
There are also maintenance and repair costs to factor in, plus letting agency fees.
Finally, there is the cost of the monthly mortgage payments. The rule is that to make a profit, rental payments need to cover all expenses with a little left over.
Findings like those in CIA Landlord’s annual report help to emphasise a key point about buy-to-let property. They highlight that location, property prices and rental rates are all key things to consider in order to make a buy-to-let investment successful.
