Our landlord customers gave the thumbs up to BTL in 2021 but are they right to do so?
Angus Stewart is chief executive at Property Master
At the tail end of December 2020, we conducted a survey amongst a selection of our landlord customers to see what they expected 2021 to hold in terms of prospects for the buy-to-let market.
Despite the challenges of 2020 and with much of the country even then in strict coronavirus lockdown our customers were surprisingly upbeat.
Almost 45% of landlords we surveyed said they are optimistic about the BTL market in 2021 with 43% saying they planned to add to their property portfolio.
Only 29% of said they were pessimistic about the prospects for BTL in 2021.
Just 10% of the landlords said they planned to exit the BTL market in 2021 and almost 70% said they were not about to sell any of their properties in the New Year.
So, what is prompting landlords to give such a positive assessment of BTL in 2021?
The glass half full view of the economy
UK landlords are quite used to riding the highs and lows of the property market.
They know that prospects are largely driven by macro-economic circumstances and it could be they are choosing to see the glass half full rather than half empty.
Despite the ravages of coronavirus, we now have two vaccines, and we could find by late spring up to 22 million people will be protected.
This will lift the lockdown and we could see a bounce back in terms of spending.
It is true that the end of the furlough scheme in April could see unemployment spike.
But new jobs are being created.
Boarded up high street stores creates a depressing view but much of our spending has moved online and new jobs are being created.
Few would have thought that Brexit could become a sideshow but that seemed to happen when the EU deal passed parliament in the blink of an eye.
Many commentators believe firms have put off investment for years due to Brexit uncertainty.
Now this uncertainty is removed, we could see corporate coffers opening and more jobs being created.
The fundamentals of the property market remain
The outlook on rents is positive. The average monthly private sector rent in England over the 12 months to September was £725 – the highest ever recorded by the Office for National Statistics.
As the UK population continues to grow – to pass 70 million by 2031 – the demand for housing will surely continue.
House price growth defied expectations in 2020 rising at the fastest pace in six years.
We need to put this growth into context.
There was a bounce from pent-up demand in May after the lifting of the first lockdown.
The market was further turbo-charged by the government’s decision in July to scrap stamp duty on properties up the value of £500,000.
Most commentators are expecting some cooling of the market with the gloomiest forecasting house prices falling by 5% next year.
But landlords can be expected to see a reduction of prices as an opportunity for investment.
A vibrant buy-to-let mortgage market is a big plus
A vibrant and competitive buy-to-let mortgage market is cause for optimism.
We did see lenders leave the market during the first lockdown largely as a consequence of other professionals in the property market such as surveyors not being to work effectively.
This time around we do not expect to see quite the same impact and that is good news.
Whilst currently the number of buy to let mortgage deals is down from its height before coronavirus struck there are still more than enough to choose from.
Rates have drifted up over the course of 2020.
Lenders have used price to manage demand.
Lenders are also seeking to protect themselves because of fears that unemployment will climb and affect the ability of tenants to pay rents.
As 2021 plays out and the situation becomes clearer, we may see lenders tempting landlords perhaps by cutting fees or offering cash backs.
Landlords are a resilient group. They may well have good grounds for optimism and perhaps so should we all.