The combined value of properties owned by UK buy-to-let investors has topped £1,250bn, almost as much as the nation’s entire pension pot.
Many citizens are spurning traditional pension schemes – as they are viewed as complicated and not without risk. Buy-to-let is seen by many as a simpler, more reliable source of income.
The explosion in buy-to-let investments has been fuelled by low-cost mortgages, together with rising rents and property prices, and looks set to become an even more popular investment choice after recent legislative changes – allowing people to spend their pension proceeds with greater liberty.
But while buy-to-let is considered a sensible and solid investment by many, there are fears in the government that many investors’ incomes would be hit hard if mortgage rates rose – even by the smallest degree. Failure to fully address tax obligations is also a concern.
Some experts say that buy-to-let investors often have little knowledge of their market. Many are ‘accidental landlords’ – i.e. those who rent out a house or flat they used to live in.
According to research by the Platinum Property Partnership (PPP), 41 per cent of investors fall into this category, while 13 per cent rent out a property they inherited. These ‘small time’ landlords are in the majority, with only around one per cent of investors owning more than 15 properties.
PPP said many landlords suffered from an “absence of any form of plan”, and had a “poor understanding of the financial returns on property investment”.
This has been backed up BM Solutions, a lending arm of the Lloyds Banking Group, which said “one in three [landlords] do not have an exit strategy or a financial or business plan”.
Are you one of our landlord building insurance customers with buy-to-let investments? Do you feel many investors fail to make plans for possible adverse events such as interest rate rises? Feel free to leave your thoughts below