Are the heyday of buy-to-let really over? Hiten Ganatra says smart landlords don’t think so and instead adapt their strategy to the new terrain
Over the past 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 many real estate investors and from a simple monetary perspective we are back to the figures that established landlords experienced in the early 1990s, with 5.5% financing costs and 10% returns.
Of course, we’ve seen a lot of new regulations come in that haven’t deterred professional landlords.
There were also 5,312 in September 2024, according to analysis of Companies House data by broker Hamptons new limited liability companies established for buy-to-let purposes in Britain, at least 28% more than in any previous September.
This research also found that the regional distribution of these new businesses is interesting, with 59% of new businesses taking place in the south of England, where higher interest rates have hit hardest and where a higher proportion of households are higher rate taxpayers.
However, only 42% of properties bought by limited companies this year are in the south, suggesting that many southern-based landowners are looking inland and north for higher returns.
A total of 46,449 companies were founded between January and September 2024, an increase of 23% compared to the same period in 2023.
This also means that more companies have been founded so far this year than in all of 2021.
At the current pace, Hampton estimates that between 60,000 and 62,000 limited liability companies will have been formed by the end of 2024, far surpassing last year’s total of 50,004.
Before 2016, the limited company structure was usually reserved for larger landlords. However, the increasing tax benefits have also attracted the attention of smaller investors.
So far this year, 54% of new purchases have been made by companies making their first, second or third purchase.
Given recent concerns around inheritance tax rules, the financial benefits further down the road from selling a limited company or passing it on to family may be another key reason for this growth.
A different kind of investment
What is clear is that real estate as a quick entry and exit investment is no longer viable given the entry and exit costs.
Hiten Ganatra
However, creating wealth for generations is the strategy many of our investors and landowners are using – so don’t listen to the doomsayers!
It’s undoubtedly a little more complex and won’t be for everyone, but that means there are opportunities and that’s why I’m very optimistic about the market, as are many of our property investors and landlords.
Hiten Ganatra is director of Visionary finance