Property Investment in 2024 - Why You Should Still Buy to Let

Feeling a bit on the fence about property investment in 2024? We don’t blame you.

There’s no getting away from the fact that 2023 was a challenging year for the buy-to-let market. Tales of landlords quitting, rents skyrocketing but returns falling thanks to increasing interest rates.

You’d be forgiven for thinking that maybe there are better options for your investments than buy-to-let, but would you be correct?

As we look forward to whatever 2024 might bring the private rented sector, we’d like to share our knowledge and experience as to why the buy-to-let market is not in the torpid state so often reported and why, yes, you should buy to let.

Looking back to move forward

A useful starting point to help you decide whether you should buy to let is our predictions for 2024 piece, published recently. Not as you might immediately think because of the predictions, but for the insights into the PRS in 2023.

Nearly all of our contributors had something to say about the year now past, and their observations are useful, as they come from professionals to have first-hand knowledge of the market and what happened.

A good example is the recurring story that landlords were quitting in their droves. Over 2023, we dedicated many, many words to this subject, and the truth is well removed from the press coverage.

Sally Beard’s comment was telling on this subject:

“Stock levels on the sales side have been low – although we anticipated a surge in landlords selling – we haven’t seen a mass exodus and mortgage rates have finally calmed down.”

And this view of the PRS was backed up by Lynsey McMenemy from Hansar Mortgages:

“I have seen many landlords return to the market last quarter of 2023 as house prices (paying well above home report) have cooled off. This has allowed many first time buyers, landlords access the market again.”

So it would appear that those who deal with landlords day-to-day are not seeing the apocalyptic exodus declaimed loudly online and in the press. Rather they are seeing the market calming and landlords standing their ground.

Coupled with house prices stabilising this bodes well for property investors in the new year. Added to the continuing disparity between supply and demand, there is still a healthy requirement for quality, rented accommodation.

For investors in Scotland, the Scottish Government’s Cost of Living (Tenant Protection) Scotland Act 2022 which brought in the rent cap will end on 31 March 2024.

Once the rent cap has expired the Scottish Government expects that many rent increases proposed by landlords will proceed as normal. However, the tenant could, if they wished, refer it to the rent officer for adjudication.

This would effectively revert us back to the process as it was pre-covid. The final legislation is yet to be announced however it does seem like a step in the right direction to help the PRS in Scotland.

This bodes well for investors, new and old, and the general tenor of the article is positive, which mirrors our own opinions.

All that glitters…

In the aftermath of Christmas, you may well have had your fill of glitter, so here’s a few words of caution to balance the good news. The first of these comes from Jack Galacher of Western Lettings:

“In the rental market, a host of factors are generating upward pressure on prices. These include mortgage unaffordability, diminishing supply and an increasingly hostile regulatory environment for landlords.

It seems inevitable that rents will rise until people simply cannot afford to pay them.

Levels of rent arrears and homelessness will continue to rise.”

This problem, while it affects the PRS and their clients, goes far beyond the ability of landlords to rectify. It will take clear and concerted action by governments to resolve the chasm between supply and demand.

If you need your rental income to cover your mortgage and deliver monthly income you are likely to find this harder to achieve in the short to medium term.

If your property investment in 2024 is intended to allow you to acquire property and benefit in the long term, then buying a single property is still a highly viable option.

If income is a goal, along with the potential for long-term capital gains, then scale matters, and you may be well advised to consider investing in a property portfolio rather than a single dwelling.

Fortunately, we have discussed the pros and cons of this approach in ‘Does Purchasing a Property Portfolio Make Financial Sense?’ so you can learn more by clicking on the link.

There are benefits of scale to be had and there may also be tax advantages at the point of purchase.

You may also want to consider whether or not to buy a tenanted property. Again this is a subject we have written about and one which we get asked about fairly often. There are clear advantages but you need to do your homework first.

We explain more in ‘Buying Tenanted Property’, however we will be revisiting this subject to ensure that potential buyers are aware of the possible mistakes they can make, and how to avoid them!

Advice from the property pros

Should you buy to let? Forgive our obvious bias but yes, buy-to-let still has much to recommend it as an investment strategy.

The market has weathered some serious challenges, and there are more to come, many from new legislation and also from the ongoing economic issues which are having a widespread effect on all aspects of our lives.

However, the PRS represents, on average, nearly a quarter of the total housing supply within the UK, and that isn’t likely to change anytime soon. Increasing the supply of housing will take more than wishful thinking.

Politicians do love to proclaim that they will build x-hundred thousand new homes every year, but until there is some radical reform of planning legislation to encourage house builders, there isn’t going to be substantive progress.

Until then, loved or loathed, private landlords have a key role to play in housing the nation, and from a financial perspective, doing so still has the potential to deliver meaningful returns.

In summary…

Investing in buy-to-let property is not a decision to be taken on a whim, and we doubt that many of you reading this just woke up on January 1st thinking ‘I must go and buy myself a house to let’!

But if you are thinking about property investment in 2024, we can help you with your journey. Whether you need advice and guidance, or you need more practical assistance in finding a suitable property or portfolio, we’d be glad to help you.

Property investment in 2024, becoming a landlord, is a serious business, and should be regarded seriously, but that doesn’t mean that it’s not also capable of delivering financial rewards. It’s why many choose to do it after all.

If you think that it could be the right move for you, pick up the phone or drop us an email and let’s chat.

Thanks for reading, and have a happy and prosperous New Year!

Written by Ross MacDonald, Director of Sales & Cofounder of Portolio

Get in touch on 07388 361 564 or email to [email protected]