Despite a challenging few years for the buy-to-let market, characterised by tax and regulatory changes, and for some, higher mortgage mortgage borrowing costs, buy-to-let remains a safe space for investors seeking solid long-term returns, according to Nicky Stevenson, MD of Fine & Country.

She points out that her firm during July saw the number of prospective new tenants surge by 38% compared to the same period the previous year. However, the supply of rental properties per branch only increased by 24%, creating a widening supply-demand imbalance in the market.

“Consequently, more than three-quarters of agents, as reported in the Dataloft Inform Poll of Subscribers, have noted an increase in renters seeking lease renewals, with just 5% reporting a decrease,” she said.

Looking at trends within the rental market, Stevenson notes that there have been many landlords who have been reducing their portfolios.

It was recently reported that the UK’s private rented residential sector has lost approximately 400,000 rental homes since 2016, with many landlords leaving the market due to growing cost pressures and mortgage rate environment.

The research, conducted by CBRE, also found that since the start of 2022, when the Bank of England began increasing the base rate, prompting higher mortgage costs, it is estimated that 126,500 rental properties have been sold.

Additionally, the research found approximately 273,500 rental properties were sold between 2016 and 2021, aligning with the additional rate of stamp duty for second properties, introduced in 2016, and phasing out of mortgage interest relief. In total, this equates to a loss of 400,000 rental homes.

Stevenson added: “According to CBRE data, since 2016, approximately 400,000 rental homes have been sold by landlords, with 126,500 of these sales occurring since the beginning of 2022. The reasons behind this shift include policy changes, increasing taxation, rising inflation, and mounting mortgage costs, all of which have reduced the financial viability of buy-to-let properties. Many landlords are looking to exit the market.

However, for those considering a medium-to-long-term investment strategy, Stevenson says existing market conditions offer optimism.

She continued: “Softening sales prices and a downward trend in mortgage rates, coupled with steadily rising rents, continue to provide attractive returns and capital growth prospects for investors.

“Money.co.uk reports that an estimated 41% of landlords own all of their properties outright, while 35% hold all their properties on a mortgage. Those without a mortgage or with lower loan-to-values are in a particularly strong position to capitalise on the current market dynamics.”

“While landlords have faced challenges in recent years, the potential for medium-to-long-term investment remains robust,” she added.