Is Buy to Let still Worth it?

UK Housing Crisis and BTL Market 2025: Are we blinded to an opportunity?

It’s been a little while since I wrote an article in the newsletter. I prefer keeping busy with new projects! Many clients kept asking for my opinion about changes in legislation, and asking for my opinion is the buy to let strategy is still worth for them to pursue. I was reluctant to sit down and write about it, or to host webinars as I did in the past, but I thought this article might help to reach many instead of just a few.

The other reasons I was reluctant to do it, is because there are so many layers and facts (not fears) to delve into. Having said that, the latest news from the Office of National Statistics about the UK population was the final straw for me, and I felt compelled to comment about it all now.

This is not investment advice of any kind, and it should not be misconstrued as such; it is just simply my opinion. Having gone through so many ‘bad and good’ changes, events and situations as a property investor and business owner, I have heard it all, well, almost.

I promise to be as concise as possible -you know I like talking a lot- and while I cannot cover every aspect, I wanted to write some points with the hopes that, hopefully, it answers some of your queries.

Population Growth and impact on the Buy to Let rental sector

Last week, the Office for National Statistics (ONS) estimated the UK population would reach around 72.5 million by 2032 [1]. This growth is based on net migration and does not even account for the average UK birth/death rate of previous decades. The reason why is because more-than-average deaths are expected in the next decade due to the baby boomers’ generation post-war. Oh my… we will end up living on top of each other if we continue this way.

This is not the only thing. According to the Office for National Statistics (ONS), the UK population is now currently estimated to be slightly higher, at around 68.3 million compared to France’s 68.2 million as of mid-2023 [2] for the first time on record.

But the numbers are not the only thing; you need to take a very good look at the graphs below to put things in perspective of what this really means!

Shortage of houses and building trades

Mortgage interest rates and inflation rate

Interest rates are not typically my main personal focus when it comes to investing. It might seem strange, but this is because in the cycle of a 25–35-year period holding a property it is inevitable to go through both ends of the spectrum. We cannot time the market in that respect, and there are pros & cons in entering the market in either case. Especially when considering investors buying position (i.e., cash vs mortgage). I have remortgaged properties when the base rate was 0.5% for instance, and I still hold a mortgage in one of my properties at a staggering 7.09% interest rate!

Yesterday, however, the Bank of England decided to lower the interest rates to 4.5%. It did come with a caveat: it predicted a higher inflation and it halved economic growth forecast for this year and increased it for 2026 & 2027 [7]. The October’s 2024 budget was considered in this, which is likely to impact the employment rate. When unemployment is high, central banks often consider lowering interest rates as a policy tool to stimulate the economy and encourage borrowing, which can lead to increased business investment and hiring, potentially bringing down the unemployment rate and boosting economic growth.

Supply vs Demand

Restrict the supply, boost the demand and sustain affordability – a formula for driving up prices.

But before delving on it, let’s do a quick review at the last decade.

In the last 10 years, there have been a number of policies that challenged directly the UK property market. Some of these felt huge at the time although new clients would not even know fully because they entered the market after such policies were implemented and once the market adapted.

The first one that deserves a mention was the introduction of the initial 3% SDLT rates for second homes, introduced in April 2016. Do you think a 2% increase on last October’s budget was a lot? We had a 3% increase in one go in the past! That felt a proper ‘hit’ which a few decided to take on the chin. In fact, I had a delayed purchase FOR ONE DAY on a property -which was meant to complete on 31st March 2016- which cost me my first 3% SDLT charge… so I do remember that period very well. Was I happy? Hell no. Do I regret the decision of purchasing that property? Hell no.

Then we skip just a year later to April 2017, with the implementation of Section 24 of the Finance (No. 2) Act 2015. This meant that landlords owning properties in their personal names (which were the vast majority) were imposed considerable limitations on the amount of income tax relief they could claim for their residential property finance costs (i.e. interest rates costs: hence why we now buy via limited companies). It seemed a ‘catastrophic’ event. Some say until today, that it was the most damaging policy against landlords ever, seemingly turning upside down their entire taxation strategy. During that period, I recall reading headlines and forums’ posts from -understandably- worried landlords along the lines of ‘the doom of the BTL market’ or ‘it’s not worth investing in property anymore’ and so forth. Most lenders at the time did not have as many products available for limited companies as they do today, so even the finance market had to adapt. Today, however, I still own properties in my personal name, and frankly, I am not prepared to sell any of them anytime because I still profit with each of them regardless.

Despite it all, with each of these ‘catastrophic’ changes the market adapted, it continued growing and investors went on with their business. The ones who worked alongside to adapt to these major changes came out stronger and continued growing their portfolio.

Then we have more recent events, even more uncertain and more unprecedented such as Brexit & Covid 19 Lockdowns, affecting not only the property market but the whole world. These events are examples of how ‘fear’ quickly spreads to the headlines and by several ‘experts’.

On one side, we had the Brexit rental market ‘prediction’, seemingly directly impacting tenancies due to a decrease in immigration (LOL!!!!).

On another side, we had Covid-19 lockdowns. I recall so many ‘experts’ predicting ‘the worst property crash since the second world war’, which never came (keep waiting!). I remember so many clients going through purchases during 2020 being -understandably- so worried about the headlines and what would happen, for which I shared my views at the time.

And what am I missing? Oh yes…the Renters Rights Bill…ok, I am finally writing about it!

Firstly, if it makes you feel better, us Landlords are not the only ones! The Employment Rights Bill and the new rate of employer Class 1 National Insurance contribution rates will– in my views- create more stress particularly on small business than the new Renters Rights Bill is likely to create on competent landlords, at least temporarily until the industries adjusts. There is a strong narrative to believe that the Employments Rights Bill will create the opposite effect of what the new government is expecting. Similarly, the new Renters Rights Bill is equally argued to create an even shorter supply of houses, a rise of rent due to less competition among fewer responsible landlords. This new legislation has already seen an exodus of smaller but good – although concerned- landlords, especially those accidental landlords or the ones who are not really looking to create any substantial business out of their property. It is also likely to wipe out unscrupulous landlords, and this is a good thing (finally!) but is also good because we end up buying their crappy houses, bringing them back to life!

In my views and in general terms, many of the new legislations under the Renter’s Rights Bill would be things that any responsible competent landlord would be doing anyway, with the difference that now you have to do it. Secondly, there are safeguards that can be put in place such as landlords’ insurance for just a nominal fee, covering expenses and voids periods in the event of having trouble tenants and/or having to issue section 8 notices for instance.

Seen from this lens, I do welcome changes. The devil is in the detail and there is still more to know though. What I do not welcome too much, is a cabinet who appears to constantly act under a negative rhetoric about business owners and landlords alike, specially with such blanket approach. I am not taking political sides here and wish to stress that as property business owners, there are always opportunities that could rise from this.

‘They cannot buck the market’
Kemi Badenoch – House of Commons, 9th October 2024
(Actually, this was first coined by Thatcher back in 1980)

During the parliamentary debate on the Renters Rights Bill in October 2024 [8], the leader of the opposition pointed out that the reason why the Bill was not passed during the previous government is because they recognised the flaws in it. They wanted to make renting more secure and affordable, but there were concerns that the Bill will have the opposite effect, as we have seen in Scotland. Therefore, important reforms are needed to be put in place before implementing this. Again, I do not wish to take sides on this, but I believe she is correct. This means shorting the supply while increasing the demand in a nation where there is already a huge housing crisis, low workforce of trades, and skyrocketing immigration.

Supply vs Demand: Let’s do the math on this again

Choking rent supply + shortage of houses + shortage of trades + skyrocketing net migration: the perfect formula to keep up prices and an opportunity for the savvy to enter the market.

We have already seen a significant increase in rents over the last 18 months, nearly doubling in some parts of our investment areas. However, I do not anticipate a major rent increase in the near future as there needs to be a period of settlement at the current levels. The imbalance between supply and demand has already had seen big part of this, for now, which will likely further stabilise rents at their current levels.

Conclusion and final thoughts

So in light of what was highlighter above on this article, to answer to the question and in ‘Is Buy to Let still worth it?’, then my personal view is a resound ‘yes’.

Each ‘catastrophic’ change mentioned above that impacted the UK property market since 2016 did also create opportunities to adapt, to profit, and to grow even more. On each cycle, only the ones who have been treating their business seriously and worked with a good team on the ground came out better positioned. It is important to step back and look at the history of events and how things and markets adapt. Facts not fear. It is a similar story all the time, new policies, new governments, new tax legislations, new events, new fears, Brexit, you name it.

Will the market have to adapt to whatever changes happen in the future? Yes, of course. Changes are not smooth though, in fact, they are normally quite ‘messy’ to say the least. Do I see an opportunity for me to take advantage and profit from future changes? Yes, of course. But when I mean ‘adapt and grow’, I really mean adapting and growing in its full sense, not just wishful thinking. In my views, there is a difference between hoping and waiting for things to work out, as opposed to getting into the thick of the situation and doing things that you do not wish to do for the sake of your goals, while AT THE SAME TIME having to grapple with the uncertainty of its result. There is no real adaptation and growth without a level of worry and uncertainty about its outcome. This latter point is an important and final one I wish to share, because nobody knows where you will be in the future unless you are prepared to go through the eye of the storm, and ‘risk’ what others are not prepared to ‘risk’.

It is a similar story all the time, new policies, new governments, new tax legislations, new fears, Brexit, you name it. But people will always need houses to live in. Supply vs Demand. This latter one about supply vs demand is actually my final point (for the third time in this article!).

Rico Pieroni

Treasure Tower Property Consultants

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