"The property investment landscape is continually changing. While traditional buy-to-let remains a viable option for some, rising costs and regulatory challenges are leading many to seek alternative investments"
- Jake Webster - The 79th Group
Landlords are fleeing an increasingly challenging buy-to-let market. With a wave of new legislation, potential capital gains tax rises, harsher EPC commitments and the introduction of the Renters Rights bill, all set against a backdrop of a tough financial outlook, it’s no wonder many are calling it a day.
Data from Rightmove paints a dramatic picture, 18% of homes currently for sale were previously listed as rental properties. This is the highest percentage recorded by Rightmove since they began tracking the figure in 2010 when it stood at just 8%. The trend is even more significant in London, where 29% of properties on the market were once rented.
A long-term trend
The unexpected decline of the buy-to-let market in recent years has unsettled the sector. Adding to the strain are fears that Chancellor Rachel Reeves may raise capital gains tax in her upcoming Budget. Concerns about the end of mortgage interest relief could push more landlords to exit too. These reforms may continue to accelerate the departure of landlords, raising concerns about the long-term stability of the buy-to-let market.
Sticking with property
For many years, private ownership has been the go-to choice for those looking to invest their money into property, with the buy-to-let market expanding significantly over the past three decades.
Despite the current market challenges, real estate continues to be a worthwhile asset class. Investors can explore various strategies to leverage its potential for growth beyond the conventional buy-to-let model.
Among the alternatives are more adaptable and diversified options, such as Real Estate Investment Trusts, property investment funds, unit trusts, open-ended investment companies, and fixed-income bonds. These alternatives can offer the benefit of risk diversification across different types of properties. Whether residential, commercial, or a mix of both.
By opting for these multiple avenues, investors can simplify the investment process, allowing easier entry and exit compared to the traditional method of purchasing and selling properties. Many of these options may also promise attractive returns while minimising exposure.
Agility is king
One of the key benefits of investments in asset management can be its inherent agility. Asset managers also have immediate access to large capital, enabling them to secure opportunities that individual investors may not have the knowledge or cash to compete with. As the property market becomes more focused on high-value assets, this manoeuvrability becomes a difference maker.
With the current market opportunity that high selling rates create and the unpredictability of future property investments, diversified portfolios can provide a more than viable alternative to buy-to-let investments.
Exploring fixed-income bonds
Fixed-income bonds can be particularly appealing for those seeking predictable returns over a shorter timeframe. In essence, investors provide capital to a real estate-related business and receive a set return after a specified period. Unlike buy-to-let investments, which come with substantial initial costs, ongoing fees, and management duties, fixed-income bonds can offer a simpler solution with no maintenance responsibilities for the investor.
But be aware there are risks involved which should be taken into account on a case-by-case basis, especially as many fixed-income bonds are unregulated, also particular products may only be available to sophisticated investors.
Navigating an uncertain market
The property investment landscape is continually changing. While traditional buy-to-let remains a viable option for some, rising costs and regulatory challenges are leading many to seek alternative investments.
For those interested in the real estate sector but hesitant about personal ownership, fixed-income bonds and asset management portfolios can offer attractive substitutes, while allowing investors to participate in the property market.
As the property landscape gets more and more complex, these investment options could represent a return to a simpler experience for investors.
