5 Compelling Reasons to Consider Buy-to-Let Investment in 2023

Posted on Wednesday, 12 July, 2023

Each year, prospective property investors and existing landlords contemplate whether it’s the opportune moment to expand their portfolio or enter the market. With the deceleration of annual price growth since the summer of 2022, many wonder if 2023 will present favourable conditions for investment.

Depending on your property investment goals, this year could present favourable opportunities. While average property values are predicted to decline temporarily, it is important to note that many properties experienced substantial market growth during the pandemic, and a recovery is anticipated within five years. Moreover, rents have been consistently increasing due to limited housing availability. For individuals considering buy-to-let investments, the combination of slower property price growth and robust rental growth can work in their favour, as rental income becomes a crucial aspect of long-term investment strategies.

Here are five reasons why this year holds promise for entering or expanding your presence in the rental market:

Scarce rental stock: There is a significant shortage of available rental properties, driving up rental prices. Tenants are willing to pay above the advertised rates to secure suitable accommodations. To ensure a property’s long-term viability, it is crucial to research supply and demand in your specific area. Collaborating with local experts like Leaders can help assess the market dynamics and ensure a property’s sustained profitability.
Opportunities in a slowing market: When property price growth slows, some buyers become apprehensive, fearing a potential crash. However, from an investor’s perspective, this presents an opportunity to purchase properties below their true market value, facilitating quicker transactions. Motivated sellers, such as those facing financial challenges or life changes, may be more open to negotiating a reduced price. Any discount obtained not only translates into instant equity but can also improve the property’s income returns.
Capitalizing on landlords exiting the market: While some landlords are selling their properties due to regulatory and tax changes, others have reached the end of their investment strategy and planned to sell around this time. Acquiring properties with existing tenants and legal compliance eliminates the need for additional capital investment to make them rental-ready. This scenario allows investors to generate rental income from the first month of ownership.
Attracting high-paying tenants through energy efficiency: With the government’s net-zero carbon emissions target for 2050 and growing environmental awareness among younger generations, tenants are increasingly drawn to energy-efficient homes. Properties with low-carbon heating systems and other eco-friendly features appeal to tenants, potentially commanding higher rental rates. Additionally, funding options may be available to assist with the costs of incorporating green improvements, either in new builds or through renovations.
Staying ahead of upcoming legislation: The government has published the ‘A Fairer Private Rented Sector’ White Paper, signaling an imminent tightening of regulations within the private rented sector. Anticipated changes include a minimum ‘C’ Energy Performance Certificate (EPC) rating for new tenancies in the coming years. Being aware of these forthcoming regulations allows investors to acquire properties that already comply with proposed standards or undertake necessary renovations before entering the rental market.

When making any purchase, it is essential to ensure affordability and secure mortgage financing without complications.