What Keeps Landlords in Buy-to-Let? Latest Data

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A recent survey sheds light on the reasons why many landlords continue to invest in the buy-to-let market, despite facing substantial tax and regulatory hurdles.

Conducted by Paragon Bank, the survey included responses from 500 landlords who each own up to three properties. The results indicate that a significant number of these landlords have long-term plans to expand their property portfolios, even though the sector has become increasingly challenging.

The findings highlight that, despite the difficulties posed by new regulations and tax changes, there remains a strong commitment among landlords to grow their investments. This persistence suggests that the potential benefits of buy-to-let properties still outweigh the obstacles for many investors.

The survey uncovered several important reasons why landlords are committed to expanding their buy-to-let investments despite the current challenges in the sector:

– Long-term rental demand: A significant 60% of landlords pointed to the consistent demand for rental properties as a major factor driving their decision to grow their portfolios. They view this demand as a stable source of income, making it a crucial element in their investment strategy.

– Retirement income: Over half of the landlords surveyed, or 54%, are focusing on expanding their property holdings to enhance their retirement income. This strategy is seen as a way to secure financial stability in their later years, providing a steady revenue stream as they approach retirement.

– Capital appreciation: Nearly 47% of the respondents believe that the potential for long-term capital growth in house prices is a significant motivator for their investment choices. They see the appreciation of property value as a key benefit, contributing to their overall investment strategy.

– Preference for property: More than a third of landlords, or 34%, have a strong preference for property investment compared to other asset types. They find property to be a more attractive and reliable investment option, offering benefits that other asset classes may not provide.

These insights illustrate why many landlords remain committed to the buy-to-let market and continue to invest despite the regulatory and tax-related challenges.

Louisa Sedgwick, Managing Director of Mortgages at Paragon Bank, highlights that the rental market is projected to experience significant growth, bolstered by an anticipated 10% increase in the population over the next decade. This positive forecast is driving many aspiring landlords to invest in rental properties, seeing it as a promising opportunity for the future.

Sedgwick further explains that the research reveals a clear trend towards long-term planning among landlords. Over half of those surveyed are expanding their property portfolios with the intention of supporting their retirement income. This long-term strategy indicates a deep commitment to the rental market, which plays a vital role in maintaining the health and stability of the private rented sector.

The Paragon study also provides valuable insights into the factors that influence landlords’ initial decisions to enter the rental market. Understanding these motivations helps to clarify why many choose property investment despite the challenges posed by current tax and regulatory changes.

Friends and family have been a significant motivator for many landlords, with 43% attributing their decision to the influence of their personal network. Moreover, a substantial number of landlords—39%—started renting out their first property by chance, often due to circumstances such as purchasing a second home or inheriting property unexpectedly.

When it comes to choosing property as an investment, landlords highlighted several key factors. A notable 67% valued the tangible nature of property as a primary reason for their investment. Additionally, 54% were drawn to property for its potential to build wealth, while 53% appreciated the ability to pass on property as an inheritance.

Louisa Sedgwick, Managing Director of Mortgages at Paragon Bank, notes: “The growing interest in the rental market reflects how personal connections and unforeseen opportunities can lead individuals to property investment. These new landlords are not only contributing to the availability of rental homes but are also seeking a stable and supportive regulatory and fiscal environment to help them maintain and grow their investments. This commitment underscores the need for policies that encourage long-term investment in the rental sector.”