Over the last few months, I have read many articles in the consumer press claiming that the era of buy-to-let is over. So, I thought I should put pen to paper to not only challenge this narrative, but also make it clear that many opportunities exist for the savvy investor.
We work with a lot of property investors and from a simple monetary perspective, we are back to the numbers that established landlords were experiencing back in the early noughties with 5.5% borrowing costs and 10% yields.
Of course, we have seen swathes of new regulation come in which hasn’t deterred professional landlords.
Also, according to analysis of Companies House data by the estate agency Hamptons, September 2024 saw 5,312 new limited companies established for buy-to-let purposes in Great Britain, at least 28% more than in any previous September.
This research also showed that the regional distribution of these new companies is interesting with 59% of new incorporations in the south of England, where higher interest rates have hit hardest and where a larger proportion of households are higher-rate taxpayers.
However, only 42% of properties bought by limited companies this year are in the south, indicating that many southern-based landlords are looking to the midlands and north for higher yields.
Between January and September 2024, a total of 46,449 companies were set up, representing a 23% rise compared to the same period in 2023.
This also means that more companies have been set up so far this year than in the whole of 2021.
At the current rate, Hampton’s estimate that between 60,000 and 62,000 limited companies will have been created by the end of 2024, far surpassing last year’s total of 50,004.
Prior to 2016, the limited company structure tended to be the preserve of larger landlords. However, the growing tax advantages have attracted the attention of smaller investors too.
So far this year, 54% of new purchases have been made by companies who are making their first, second or third purchase.
With recent concerns around inheritance tax rules, the financial benefits further down the line when selling a limited company or passing it down to family may be another key reason for this growth.
A different type of investment
What is clear, is that property as a quick in an out investment is no longer viable given entry and exit costs.
However, creating generational wealth is the strategy that many of our investors and landlords are adopting – so, don’t listen to the doom mongers!
Undoubtedly, it’s a little more complex and it won’t be for everyone, but that means opportunities exist and so I am very optimistic about the market, as are many of our property investor and landlord clients.
Hiten Ganatra is managing director at Visionary Finance
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