New Year, New Threat for Buy-to-Let Market
The new year will usher in a new challenge for Buy to Let landlords.
Build to Rent.
This is an American concept which is set to dominate the country’s property market pretty much in the way McDonalds, KFC and others have swept through the fast food industry.
In some parts of the country there is a massive shortage of property.
To combat this the government is providing funding through loans and equity investments for “viable” development schemes.
More than £30 billion is earmarked for different Build to Rent schemes.
The new property must be residential and will be used only for rent.
They cannot be sold off individually, but will be managed by a large institution, most likely the same one which built it in the first place.
Why is this a threat to private landlords? Because these new developments will be competing for tenants on an industrial scale and the smaller Buy to Let investor will be unable to hold their own in what will become a David v Goliath battle.
Except in this case Goliath, with the odds stacked heavily in his favour, is destined to win.
Not only that, these government-backed investors will be seeking tenants at the higher end of the rental scale, leaving only the less lucrative market for the traditional Buy to Let landlords.
This strategy is currently in its infancy but already there are four schemes up and running in Scotland – two in Glasgow and one each in Edinburgh and Dundee.
It is yet another hammer blow to private landlords, following on from increased taxation (in the form of higher stamp duty and the extra home surcharge), and demands for larger deposits from lending institutions.
In addition to all that, HMRC is intensifying its efforts to track down private landlords who have neglected to pay tax on their rental income.
Faced with such pressures, it is not surprising that a considerable number of private landlords are beginning to formulate an exit strategy.
If you find yourself in that situation, then perhaps we can help.
R&T Property Solutions are seeking to buy residential property in all parts of Scotland.
Our HQ is in Glasgow but we have invested in flats in Edinburgh, family homes in Falkirk and rented property in Stirling, as well as portfolios in Aberdeen and Inverness.
Regardless of where your property is situated, we are keen to hear from you.
We offer a fast and secure service and can often seal the deal within seven working days.
If you need it in a hurry, we can easily pay you in cash.
We operate under our own code of ethics which ensures your tenants will not be unduly inconvenienced while the transaction takes place.
And we don’t require a Home Report.
If this appeals to you then don’t delay, contact us today.
At the moment, if you have invested in the Buy to Let market you won’t really feel the impact of Build to Rent on your nest egg.
But that will change because at some stage in the near future you will be up against charities, pension funds and insurance companies who will be building brand new rental properties everywhere they can.
So how will this new concept work in practice?
The first major change from the norm is that the organisation which pays for the building will continue to own the structure and won’t sell it in the short term, either as a single unit, or in individual parcels.
The new corporate-style investments are likely to include concierges and on-site health suites, with full-time maintenance support as standard.
All the tenants in a complex will have the benefit of the same landlord. It is thought this type of set-up should lead to better access for renters who require assistance.
But perhaps the biggest change offered by Build to Rent will be longer tenancies. It’s understood leases of up to three years will be available, on the basis that the institutions want tenants to remain as long as possible.
It is predicted that these lifestyle-orientated, modern homes with leisure facilities, communal living and no hassle management will really take off in the next few years.
All of this spells problems for the smaller private landlord, who will not have the resources to compete.
This is especially true in the major cities where the new-style homes will be concentrated, as investors lacking in experience of the property market partner up with local authorities, housing associations and even housebuilders.
As the private rental sector undergoes these changes, many small investors, who saw Buy to Let as a golden opportunity to increase their wealth, will start to feel the pinch.
If you think this scenario might apply to you then contact R&T Property Solutions.
We are investors for the long term and fluctuations, either political or market-led, will not knock us off course.
That’s why we’d like to hear from you. We’ll guarantee to give you our best advice whether you are thinking of selling a single flat or a large portfolio and, more importantly, whether you eventually sell to us or not.
These changes have only just begun to trickle down. It won’t be long before they become a raging torrent.