2023: The year of challenges and opportunities in the BTL market – The Buy To Let Broker

There are a myriad of variables, creating a complex vista for landlords, including current mortgage rates, Autumn Statement measures such as the reduction in the capital gains tax (CGT) allowance and the reversal of dividend tax cuts, compounding with the sudden increase in finance costs for most leveraged landlords, and upcoming legislation changes or proposals such as on energy performance certificate (EPC) ratings.

Government action needed on portfolio sales

There is no doubt that some landlords are marketing property with the intention of selling a tranche of their portfolio. The huge challenges in re-financing Buy to Lets right now, including the more penal tax regime for landlords, of course has a threshold tipping point.

That being said, with the private rental sector (PRS) creaking at the seams, and with government’s dependence on the private landlord, should we see a significant tranche of landlords look at selling (the implications of reaching such, would potentially have tragic consequences for tenants, and some of society’s most vulnerable), then one would expect the government to finally make some reactive changes.

Picking up competitively priced purchases

To provide balance, the considerable majority of landlords are still incredibly compelled to hold on to stock, such is the demand for rental stock and the inevitable rising of rents. Rising rents will always correlate, to some degree, with landlords’ compulsion to hold on to stock.

However, it should be noted that historically, increasing rents generally correlate with increasing profits, whereas we are sat in a somewhat different economic vista. Depending on your data source, and indeed locality in the UK, rents have increased by circa 10 per cent to 25 per cent over the last 12 months, (although this does not offset that many landlords’ finance costs has increased over 100 per cent during the same period).

Professional landlords will invariably see this economic uncertainty as an opportunity to purchase competitively priced stock, and as such, potentially obtain stock at prices that enable marginally improved yields. I am acutely aware that there will need to be increased support and innovation from lenders, and an education piece burdened by partnering lenders and brokerages, to ensure that landlords are prepared, and able to navigate, the potential tide of challenges over the next 12 months.

Specialist brokers adding value

Considering all the above in context, with the forensic underwriting required pre-application these days, there are a plethora of ways a specialist broker should be able to add significant value to a landlord’s property business. It is now even more imperative that, as brokers, we try to look at any client’s circumstances placing emphasis on a case’s individual merits and context, rather than apply a binary stance.

All of the above suggests a wonderful opportunity for specialist brokerages and lenders through 2023 that are committed to the specialist sphere of the market.