Back in 2015, the Bank of England, using a set of stress tests to assess the effectiveness of banks in the event of a financial crisis, expressed concern towards the UK buy-to-let market, which informed the decision that year to limit residential mortgages worth more than 4.5 times the holder’s income. 

Yet the most recent stress test, published in July 2023, underlined two important points. Firstly, the UK banking system could withstand an imminent ‘serve macroeconomic scenario’. Secondly, the UK housing market is in a position to hold firm in confronting a season of economic troubles.

Indeed, the past few years have proved difficult when considering the set of domestic and international circumstances the buy-to-let industry has faced. But while assessments of the buy-to-let market were coloured with caution, this year has marked an exciting period of growth. This is in keeping with the broader housing market experiencing an uptick in consumer demand and participation. As such, let’s investigate the current climate of the buy-to-let market as of now and what to expect for the remainder of the year.

How are Buy-to-Let Landlords Doing?

The first point to underscore is the general confidence buy-to-let landlords are feeling looking ahead into 2024, which constitutes approximately 45 per cent of the national private rental market. The Mortgage Lender surveyed a group of buy-to-let landlords and identified that 74 per cent expressed confidence about the performance of the property market over the next year. In another study, Butterfield Mortgages found that although 49 per cent noted that interest rates remained a challenge, 34 per cent expect to expand their property portfolios in 2024. 

These statistics reflect a generally positive attitude against the backdrop of concern expressed by analysts, with Moneyfacts describing the ‘signs of stability’ as indicative of the increased vitality of the market. It was what Rachel Springall, a Moneyfacts financial expert, described as a ‘positive turn of events for landlords’, a group which have felt the impact of high interest and mortgage rates over the past few years.

This renewed strength, moreover, is found in the increased performance of the housing market. On average, listings were 5 per cent higher than the 2019 benchmark levels throughout the first quarter of 2024, a twofold indication of the increased activity of buy-to-let products and the demand expressed by consumers.

What are the Current Trends?

Unpacking the increased listings further, this activity in the buy-to-let market is happening outside of London. Paragon Bank identified that Manchester, Birmingham, and Newcastle-Upon-Tyne offer the best locations in terms of investment to yield – locations offering products in dense university and employment hubs.

Jason Watkin, chief executive of Lomond, commented that ‘this high level of demand, coupled with low void periods and the high returns on offer, provide a very attractive proposition for today’s investors’. Targeting these areas is becoming an exciting investment opportunity as demand continues to surge. Increased presence in these regional markets offers buy-to-let landlords further ways to diversify their market portfolios.

Underpinning these higher yields rests on the greater amount consumers are paying in the rental market. Lisa Stephenson, letting agent and regional director of Entwistle Green, pointed out that ‘rents are at an all-time high and demand from tenants has risen to record levels.’ Between March 2020 and March 2024, tenants have paid 28 per cent more in rent, up from £909 to £1,160, and these figures are projected to slowly increase over the next year.

Experts have also been keen to point out the improvements in the general financial conditions of consumers. Although William Reeve, chief executive at Goodlord, pointed out that rent increases have consistently outstripped inflation since March 2020, Richard Sexton, director at E.surv, argued that the combination of solid wage growth, eased financial hardship, and falling interest rates are bolstering consumer confidence. This is therefore having a significant impact in aligning demand with affordability, hence the rise in consumer participation in the buy-to-let market over the past quarter.

What to Keep in Mind for this Year?

The present data supplies buy-to-let landlords with an optimistic picture of what’s to come this year. Confidence is felt among all sectors, landlords and consumers alike, and this is engendering growth in the market. The overall property market has entered a stable period over the past quarter. This offers a sturdy foundation on which to satiate consumer demand and encourage further investment. 

Given the expectation of falling interest and inflation rates over the coming months, the buy-to-let industry looks to be in a positive position. It is important to remain observant in monitoring the trends and developments within the industry, for locations such as Manchester offer enticing hotspots for investment coordinated with yield. As we head further into the year, it is useful to monitor these areas as potential locations for investment outside of the capital city.