The best buy is new-build
BUY-TO-LET has been falling from favour recently and new rules on no-fault evictions, plus looming laws on minimum energy performance ratings mean many landlords with older properties are considering selling up. However research by the English Private Landlord Survey – commissioned by the Government’s Department for Levelling Up, Housing & Communities – has found that 54 per cent of landlords in England use buy-to-let properties as a “long-term investment to contribute to their pension”.
Property consultancy Savills also estimates that 1,491,000 buy-to-let properties in England – worth an estimate £437billion – are owned by retirement-age households.
So with net-zero proposals requiring all private rentals to have a minimum energy performance rating of C by 2028, what’s the future for buy-to-let investment?
Only a few weeks before the Liz Truss-Kwasi Kwartung mini-budget, Savills’ head of residential research Lucian Cook said: “Many are proclaiming that the golden age of buy-to-let investment is over due to increased regulatory requirements, a higher tax burden and the prospect of further increases in the cost of debt.
“But it is set to play an increasingly important role in providing pension income with many landlords, who were at the forefront of the buy-to-let explosion of the noughties, now hitting or approaching retirement age.”
Now the rise in mortgage rates and fewer buy-to-let mortgage deals are posing additional problems to the already daunting cost of improving energy efficiency before renting out older houses and flats.
All rental properties currently require an Energy Performance Certificate (EPC) with a minimum E-rating that landlords must register on the Government’s Landmark database. From 2025 that is expected to be raised to C for new tenancies and to all rental homes by 2028.
David Hannah, group chairman at Cornerstone Tax, warns: “You must make sure you buy a ready-to-let property that meets the national and local standards.” The easiest way to do this is to buy a new-build in an area where you know there will be high demand.
One couple who opted for new-builds because of the EPC requirement is Andrew and Lesley Searle, who bought two investment properties when they downsized from Oxfordshire to Kent. “There’s very little to invest your money in nowadays,” says Lesley, 68, a former chartered surveyor.
“Because it’s so difficult to protect your money, it just made sense to tie up our spare cash in bricks and mortar.”
The Searles bought two Maidstone-style houses at Richmond Park, inWhitfield just outside Dover, where a few three and fourbedroom homes are still available from £335,995 (0330 355 8502; barratthomes.co.uk).
The development has a new primary school, and plans for a Fastrack bus service to Dover, and both houses were let almost overnight to families, providing a yield of around five per cent.Andrew, 69, says they wanted a maintenance-free house and adds: “That didn’t necessarily mean we’d planned to buy a new build but by the time we’d costed getting a second-hand home up to a rentable standard and energy performance rating, we’d have wiped out any purchase price advantage.
“There is a new-build premium but the properties are already compliant with current and future tenant legislation, and come with a warranty from the housebuilder, meaning there are no surprise costs or hassle for us.”