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Why buy-to-let is back in business

It’s no secret that the buy-to-let market has seen a wealth of criticism in recent years, with many pulling out of the practice altogether. Three years on from the initial market dip it’s time to ask, is buy-to-let truly dead?

Since 2016, buy-to-let investors have had to contend with an extra 3pc stamp charge on second homes, increasingly toughened affordability checks, and harsher restrictions on deductible interest. This culminated in what has been called a ‘perfect storm’ of government changes that began to stagnate the market almost immediately.

Despite this many experts have high hopes for the market in the near future. In fact, as early as 2016, some were predicting that 2019 would be the year to return to the buy-to-let investment. 

Remember, buy-to-let stats are artificially subdued

Typically, the Bank of England excludes buy-to-let borrowing via limited companies from its lending stats, at least until the third quarter of the financial year.

Additionally, landlords have been increasingly buying through limited companies and have paid corporation tax rather than income tax, a practise which has become increasingly dominant since 2017.

Indeed, in the first quarter of 2018, 77pc of all buy-to-let applications occurred through limited companies – an historic high.

By comparison, buy-to-let still looks good

While returns on buy-to-let are not what they once were, in truth this falls in line with decreasing property appreciation. Moreover, post-2008, returns on most assets have fallen equally if not more so. The returns simply aren’t what they used to be.

As The Telegraph pointed out, “when the Bank of England changes its reporting policy later this year, the data on buy-to-let may look far more upbeat than it does now. There are still reasons for landlords to be cheerful.”

And the future may be even brighter; with a nationwide dearth of newly-built properties and a populace decreasingly likely to purchase a home, demand for rental properties should continue to grow.

Interestingly, for those who have started to dip their toes back into buy-to-let investment, a noticeable shift in where the best yields come has been noticed. In short, it is the north that dominates.