Buy-to-Let has been squeezed this year. Whether rich or poor, anyone in the Buy-to-Let industry knows that the government initiatives created in 2015 and 2016 will certainly make costs more expensive.
All elements of the Buy-to-Let process are becoming tougher. Banks’ Buy-to-Let lending arms are now using more stringent criteria for qualification. Stamp duty is now more expensive on the purchase. Tax relief has been cut for profits. Increased regulation of rental properties has been introduced.
Overall, it appears to be a rather gloomy picture for the Buy-to-Let market as it stands. Indeed, although the market surged during the beginning of 2016, this was only an artificial market response to the April Stamp Duty surcharge. Now things have cooled down extremely fast. Nor does the market appear that it is going to pick up anytime soon as banks are making it more difficult to receive capital.
Yet, there do appear to be opportunities for property investors, albeit with potentially higher risks. Build-to-Rent has been gaining more media and market attention of late as it appears resilient in contrast to the Buy-to-Let cooldown.
For those who do not know about Build-to-Rent, it was launched in 2012 as part of a government initiative to increase the supply of homes in the market earmarked for specific rental use. Essentially, the government wants to shift commercial development from building to sell to building to rent. Traditionally, the rental sector has been dominated by small to medium size landlords. Thus, this policy may signify a shift of the rental market to the corporate sector in the near-future.
The Build-to-Rent funds is available to large investors as a fully recoverable commercial investment available as a loan to cover up to 50% of eligible development costs. Developers pay the loan by refinancing the deal or selling on to an institutional investor within one or two years of completion.
Already in 2016 there has been a large surge in the number of Build-to-Rent homes planned across the UK. In just six months, the figures have doubled to 45,000 new homes according to the British Property Federation, representing a 107% increase on the 22,000 in October.
It appears that the sector is finally gaining recognition and added legitimacy. Recently, the Association of Residential letting Agents signed up its first Build-to-Rent institutional member, called Get Living London. The fund is backed by Qatari Diar Real Estate Invest Company and other funds. It lets and manages over 1,400 properties in the Olympic Village. It seems that they have recognised the opportunities in this potentially lucrative sector.
Other experts have noted the surge in Build-to-Rent in certain regions, particularly Manchester. This city is seen as having a chronic under provision of high quality rental accommodation for an increasingly affluent set of young professionals. Since reports show the demand for large scale rental accommodation already exists, it means that various developers have already announced multimillion pound projects to commence soon in Manchester.
As Build-to-Rent gains tractions, hopefully we will see more large-scale rental developments. By shifting the focus from Buy-to-Let to Build-to-Rent, the government may have found a long-term method to ease some of the housing supply crisis. With an increased amount of properties available for rent, it is possible it may reduce the inflationary rental prices occurring nationwide Although these evelopments are likely to contribute to the existing trend of a growing private sector rental market, some of these properties will eventually be released onto the ownership market after a set amount of time. This could also help to relieve the inflationary asset price growth.
One problem with this new initiative is that it could make life more difficult for small and medium landlords. As big corporations enter an industry traditionally dominated by smaller investors, it may make it more difficult for the “man on the street” to be able to compete.
As such, a way to stay competitive is to stay efficient. If big firms are entering the rental market, then the average landlords needs to improve all processes within their property portfolio. Arthur recommends implementing modern technology, such as Property Management Software Systems, to enable this and stay competitive. Arthur Online is an easily downloadable app that can be accessed anywhere, allowing landlords and property managers easy optimisation and communication with the different user groups involved in the process of letting.
By using new technology, landlords and property managers can stay competitive. To lose competitiveness could lose income. Arthur recommends starting now. By starting soon, property portfolios can be readily integrated with the app, allowing organic portfolio growth from within the software.
Stay competitive, Stay Arthur.
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