Residential Property is Still the Investment of Choice

Latest News/10.03.2021

Despite a challenging few years for landlords following tax and regulatory changes, buy-to-let continues to outperform most other asset classes. With poor returns on savings from banks and building societies following historically low interest rates, a large proportion of investors have turned towards residential property to supplement their income. Add to this the backdrop of low borrowing rates on mortgages, high demand from tenants, stable yields and rising house prices over the last year, buy-to-let remains an attractive investment option.

According to UK Housing & Spatial Information Specialist, Dan Cookson, in Scotland in February 2020 there were 325,649 households in the private rented sector – 63% of these were flats and 27% houses. What’s more, 49% of private rented properties are two-bedroom properties with one-bedroom properties making up 24%. The private rented sector is estimated to be worth £46 billion and is therefore an important part of Scotland’s economy with approximately 242,000 registered landlords.

With around 10 million people in rented accommodation, it is no surprise that research from Knowledge Bank has revealed a growing number of new buy-to-let investors. Knowledge Bank provides a large database of mortgage lending criteria, and the latest monthly criteria index shows the terms that brokers are searching for, which gives an indication of mortgage completions in two-or three-months’ time.

This analysis of brokers’ searches in February found that intermediaries are working with a growing number of potential new landlords along with interest from first-time landlords becoming the most-searched term by brokers in February. It also suggests that those who weren’t currently on the housing ladder were looking at buy-to-let as an option due to restrictions around loan to income for residential properties. This reveals that investors, who would normally look to deal in stocks and shares, are turning their attention towards buy-to-let.

Another top search term was ‘Soft footprint at DIP stage’ suggesting that brokers were carrying out searches that would not impact future applications possibly as a result of clients having a low credit score. ‘Furlough’ was also top of the searches along with ‘Maximum age at end of term’ and ‘Self-employed’.