Buy-to-let is still an attractive long-term investment

Buy-to-let investment in the long-term is still likely to beat savings rates by a significant margin over the coming years, despite recent regulatory and taxation changes, new figures suggest.

Fresh data from Kent Reliance shows that over the course of a 25-year investment, a basic tax paying landlord, placing a typical 30% deposit of £73,908 on a property, would generate a total profit of £265,500 after all costs and taxes.

Accounting for the impact of inflation over the period, this represents a profit of £162,000 in today’s money, or £6,475 annually.

John Eastgate, sales and marketing director of OneSavings Bank, commented: “The buy-to-let market is undergoing a sea change. Regulatory and taxation changes have altered the market dynamic, reducing its attractiveness to amateur landlords, and increasing the tax bills of higher-rate investors.

“In spite of rising costs, there are still healthy returns to be found in property for committed investors.”

Eastgate points out that the “days of speculation” are gone. He says that it is important for buy-to-let landlords to adopt a long-term business plan when investing in the sector.

He continued: “Investors must be prepared to undertake business and tax planning, understand the risks as well as the rewards, and, most importantly, the responsibilities they have towards their tenants.

“Policy change remains a threat, however it is essential that the role of professional landlords in providing vital housing stock is not undermined.  Without them, the supply of housing in the sector would naturally shrink, leading to higher rents for a growing number of tenants competing for accommodation.”

The figures vary substantially from region to region across Great Britain, driven by significant differences in house prices, yields, and importantly, the initial deposit investors must place.

While investors in London may see by far the largest total profit in cash terms, nearly £308,000 in today’s money, they must also supply an initial deposit of twice that of the national average, and face much higher costs.

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