The future of Buy to Let in London- thoughts for Landlords past, present & future
London, one of the most desirable and admired cities in the world, has seen unparalleled and constant capital appreciation unlike any other City (I think) in the world. For over 100 years, property prices in the capital have doubled approximately every 10 years and, with that, rental prices have soared too. In the past 10-15 years the Buy to Let or PRS (Private Rental Sector) sector has changed dramatically- and there are few signs of slowing. So, what does the future hold for Buy to Let investors in London- both those already in and those still to join? Here are my thoughts......
Buy to Let is here to stay
Despite the recent 'attacks' on Landlords by the government with a 3% Stamp Duty surcharge on purchases and the pending changes to the tax structure (removing the ability to off-set mortgage interest against your income)- Buy to Let investments still remain an investors top pick.
Why you may ask? The simple answer is stability. Whilst there have been recessions, if you can weather these, both the capital & rental value have continued to climb. This has made residential property in London not only one of the best performing investments, but one of the most stable. Why is that? Whilst trends (and the companies that cater to them) come and go- people will always need a roof over their heads. It really is that simple.
In fact it is widely accepted by the industry, investors and expert analysts such as Anthony Codling (among many others) that the inability by the government to build enough homes each year will ensure that demand will continue to outstrip supply. When this happens, an assets value will always increase.
More regulation & more to come
The last 10 years has seen the industry transformed by regulation. In fact, there are now over 160 regulations in place creating over 400 laws which landlords and lettings agents may have to abide by when letting out a property (not all laws & regulations apply to every let). If you think that is a lot (and you'd be right) be prepared as there are more to come.
With this in mind I am of the firm belief that the market will become increasingly impossible for small, part-time Landlords to be able to self-manage as they will be unable to remain legally compliant without committing substantial time and resurces to training and the implementation of processes and procedures that they simply do not have. As such, you will see two main sectors dominate the market in the future- agency managed portfolios & the corporate 'build to rent' sector.
Tech, tech and more tech
As the millenial generation continue to age and become decisions makers (and whatever we call the generations that arrive after them) we will continue to see every single aspect of society dominated, in one way or another, by tech. Not just that, but the decison makers of today are increasingly driven by tech- both at home and in the work place. Some sectors will be lost entirely to the futuristic world of AI (Artificial Intelligence), IoT, SmartTech, robots and so on. However, many areas will simply see huge effiiciencies driven by the streamlining, automation and improved UX (User Experience) of a digital platform. More so, these will not be applications on your laptop/PC/Tablet but will increasingly be geared almost exclusively towards mobile.
Some letting agents (not enough in my mind) are already waking up to this realisation and already have PropTech (as is the industry term now for property related tech) firmly embedded in to the backbone of the business.
I am glad to say that we recognised this before most- being one of the first agents in the UK to adopt a cloud-based software to run our agency with called Jupix (now part of PSG/ZPG). Since then we have worked with various tech companies and products and are constantly on the look for the next thing.
Some of the products and companies we work with today include Property File (a product we helped develop), Virtual Reality by eyespy360, reports by iSurvey, movebubble viewing booking software, Property Technology (ltd), instant online valuations by ValPal, SEO services from GrowthTrack, Web design and hosting by Resource Techniques, Facebook, twitter, Zoopla, Rightmove, comms & marketing automation and facilitation by Brief Your Market- as well as being a big fan of other solutions we don't currently use like FixFlo (the maintenance reporting platform and a lot more) and goodlord (transforming lettings applications).
Ever increasing customer service
Tha facilitation of digital platforms combined with the immediate actions and transparency they bring will mean that the standards of our sector will continue to improve in, what I believe, will be an 'upwards only' trajectory. The increasing regulations, and enforcement of this through tech, will mean the rogue elements (landlords and agents alike) will soon have nowhere to hide and will quickly be eliminated once and for all.
Much as is the case now, those of us looking to maintain, or grow, our market share will only be able to do so by going above and beyond for our Landlords and Tenants alike- resulting in a win/win for both parties. This is an approach we founded our company on and has stood us in good stead since we launched in 2004- and I know I am far from alone in this when I talk to other, high quality agency operations.
Longer term investments
I do believe, however, that investing in to the London Buy to Let market will (increasingly) be a long term venture as both capital appreciation and rental yields get squeezed over the coming years and decades. However, property will, I firmly believe, continue to be one of the most stable asset classes that will enable investors to create a stable investment to realise when they need it most- when they retire.
In summary, the future is mysterious but exciting and represents an asset class where, short term returns may reduce, but long term returns will remain strong in a sector which is set to see the very best it has to offer in the years to come.
This article was written by Kristjan Byfield, Co-Founder at base property specialists and also a London tenant since 1998.