Is now the right time to invest in a UK buy-to-let property?

Is now the right time to invest in a UK buy-to-let property? [Image: MarioGuti via iStock]

For those who want to invest in a buy-to-let property in the UK, the concern is always whether it is the right time. There are many aspects that could affect a buyer’s decision, including the country’s political and economic situation.

With March 29th set to be the date that prime minister Theresa May triggers Article 50 and kicks off the process of leaving the EU, the UK could find itself in an uncertain period. It will take at least two years for Brexit to be negotiated, which could result some anxiety in the property market.

It could cause fluctuations in property prices, with some analysts predicting that the triggering of Article 50 could lead to falls. However, the same prediction was made about property prices after the Brexit vote in June 2016 and it turned out to have a minimal effect on the market as a whole.

During the Great Buy-to-Let Debate 2017 at the end of February, Professor David Miles CBE, of Imperial College London, said that Brexit could represent a real opportunity for the private rented sector as many EU migrants in the UK who may have been thinking about buying their own homes would prefer to stay in rented accommodation.

The triggering of Article 50 could further impact the uncertainty these renters feel about owning property in the UK, leading to more of them needing homes to rent.

Article 50 could also see economic uncertainty, which could then have an impact on market sentiment. The Brexit vote brought with it a downturn in the value of the pound. This has led to the price of consumer goods in the UK rising, which has affected people’s disposable income, making the possibility of owning property less realistic.

Article 50 could have the same sort of impact, possibly bringing with it economic uncertainty. When people are unsure about the security and future of their jobs, they often consider moving elsewhere - whether that’s within the UK or abroad.

When this is the case, people will be less likely to think about buying their own homes, preferring the flexibility of rented accommodation. It allows them to move at short notice and not have to worry about selling their property.

Although there are advantages to investing in a buy-to-let property at present, the Council of Mortgage Lenders (CML) has pointed out that any increase in the amount of money lent to borrowers has not been driven by these investors.

According to CML senior economist Mohammad Jamei, the buy-to-let mortgage market is in a weak state. He said: “The weakness in home movers means few properties are coming onto the market for sale, which is aggravating a supply-demand imbalance that has characterised the market since late 2013.”

He explained that this looks set to continue for the next few months, which means that the properties may simply not be available at present.

Investors should therefore consider how quickly they want to venture into the UK’s buy-to-let market and plan their buying accordingly.