I have lost count of the number of people I’ve spoken to over the years who have told me that they are relying on their Buy to Let (BTL) property portfolio to provide for them in retirement.
There are 2.6m private landlords across the UK who own BTL residential properties - most of these in the England - with a particularly high concentration in London.
A study of the retirement income prospects of Generation X aged 40-55 today, which Dunstan Thomas completed just before the pandemic broke in the UK, found that 12 per cent of Gen Xers living in London had BTL property-linked long term savings.
I have always questioned the wisdom of putting all your long-term savings into one basket/asset class.
However, I have never been more worried than today as the shine is coming off residential BTL investment returns very fast now.
Why is this happening when surely bricks and mortar must be the ultimate safe haven when stock markets are so skittish?
It is becoming clear that both the political climate and legal changes over the last five years have not favoured BTL investors.
Political climate
Why do I feel that?
Firstly, you would think the political climate would be broadly pro the landlord when we have a Conservative Government in power.
Yet, as rental prices, particularly in rental hot spots like Manchester and London, have continued to go up, and more and more people find themselves joining ‘Generation Rent’, a significant lobby has grown up around asserting renters’ rights over landlords.
And politically the centre of gravity has started to move away from BTL investors.
In one webinar I attended late last month, I found a spokesman from the National Residential Landlords Association (NRLA) confirming that in the 2019 General Election, the Conservatives gained an eight per cent swing of the growing army of renters’ votes, mostly in inner city constituencies where they were able to take long-held Labour seats as a result.
Deregulation Act 2015 constraints
If the political climate seems less favourable to BTL investors, the legal changes tell the same story, starting with the Deregulation Act 2015.
This law brought in very significant tenant safeguards which were designed to clamp down on rogue landlords.
They added safeguards but also meant much higher costs for all the additional checks and paperwork which had to be in place ahead of any Assured Shorthold Tenancy agreements being validated and signed.
These included:
1. Requirement for a ‘right to rent’ check which requires the landlord to check the tenant’s documents in their presence to expose any illegal immigrants.
2. Requirement for landlords to have an up to date gas safety certificate for any gas-fuelled appliance.
3. Requirement for a valid energy performance certificate (EPC) for the property
4. Proof of working smoke alarms and carbon monoxide detectors.
