For prospective buy-to-let investors there’s a sea of conflicting information out there to absorb. There are acres of column inches detailing how a toxic mixture of rising maintenance costs, higher regulatory-related expenses and enlarged tax liabilities has smashed landlord confidence over the past few years. But at the same time, those very same investors have enjoyed a huge upswing in the rents that they received.
So what is one to do?
Fresh data from Hamptons International reveals just how strong rental growth has been recently, up to 2.1% year-on-year in November 2019. This was almost double the rise of 1.1% in the previous annual period. And growth was seen in every region of the UK too.
The estate agency explains that “rental growth has been driven by a decrease in the number of homes available to rent. The tax and regulatory changes announced in 2016 have resulted in fewer landlord purchases, particularly in the South, causing some landlords to sell up.”
Hamptons notes that landlords have purchased around 11% of all the homes sold in Britain so far in 2019, down 5% from the peak recorded in 2015. And as a consequence, the number of properties available to rent has fallen 7.8% in the first 11 months of the year, and particularly so in the South of England where the number of available homes dropped 11.7%.
The report shows that, unsurprisingly, rent growth in this region has outpaced the UK average by quite a margin as a result. In the South West and South East, the annual rise as of November stood at 4.2% and 4.1% respectively, followed by the East of England at a distant third (up 2.6%).
What should you do?
That’s not to say I am tempted to invest in the sector any time soon, though. Government attacks on the buy-to-let sector continue to rise — next year sees the total loss of mortgage interest tax relief for landlords, for example — and this makes it a hugely-unattractive place to put your cash, despite the prospect of rising rents.
I’d much rather invest my money in the British stock market, an arena immune to rising governmental interference and one in which possible returns remain robust. Long-term investors here can expect to make an annual return of up to 10%, evidence shows, and right now, dividends from UK plc are rattling around at record highs.
While the worsening macroeconomic and geopolitical landscape makes it a difficult time for investors, with the right investment strategy, it is still possible to make a mint from share markets. In fact, there are countless stocks out there — from gold miners to other safe-haven plays like pharmaceutical manufacturers and defence contractors — that stand to benefit from rising investor tension. Thus I believe that share markets are a much better place to park your money in the New Year than buy-to-let.
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Royston Wild has no position in any of the shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.
Motley Fool UK 2019