#85 - Is BTL dead?

What I’m Watching

Even if you have a passing interest in boxing, you would’ve heard about the match between Tyson Fury and Francis Ngannou. Everyone who is saying it was a sensational fight is not exaggerating. Admittedly I was one of those critics who wrote it off as a gimmick fight and didn’t give Francis a chance given it was his first ever professional boxing match.

Since the fight, Mike Tyson who trained Francis released a 50-minute documentary-style YouTube video. It’s such a great watch and very intense all the way through. 

Resource of the week

This week a resource from yours truly 🙂

I’m really excited to be able to announce that I’m working on Property Academy which will open for enrolment later this year. So in the run-up to that I plan to be giving away a load of free resources and tips for the whole of this month, make sure you sign up so you don’t miss anything! This week, I’m giving away my pdf breakdowns, more to come!

Quote

The often-used phrase “pay attention” is apt: you dispose of a limited budget of attention that you can allocate to activities, and if you try to go beyond your budget, you will fail.

Daniel Kahneman - Thinking, Fast and Slow

News and trends

• House price inflation has slowed from 9.6% to -1.1% over the last year. The housing market has largely been resilient despite predictions of much larger falls last year, mostly due to stronger stress tests.
• A reform to phase out leaseholds to feature in the King's speech. I think it’s good they’re thinking about this, but I am sceptical about how (and if) it will be implemented.
• YouTube has announced they are launching a global effort to stop adblockers. Personally, I haven’t seen a change. I suspect it will be one of those cat-and-mouse scenarios with people developing anti-detection addons etc.
• Bank of England holds the base rate at 5.25%, which is not a huge surprise given that inflation has started coming back down. It’s in line with predictions I heard at the NRLA property conference that interest rates look likely to peak at around 5.25%-5.5%.

Thoughts

A big question for people who are considering investing in property is asking whether BTL is dead? Well, the short answer is no. You’re probably thinking, of course, you’ll say that you invest in property yourself and you are a property content creator. Well, that’s true, but I’m also putting my money where my mouth is, and my view is based on the underlying data.

As touched on previously, because of the stress tests brought in after the 2008 financial crisis, affordability is stronger and we see that the market is much more resilient to increases in interest rates.

We see possession activity at historically low rates despite the interest rate rises. A house price crash has not materialised. At the same time, the private rented sector has simply stopped growing since 2016 while demand for housing continues to climb.

As a result of this, rents are forecasted to climb four times faster than house prices in the next four years. We’ve already been seeing rent increases the likes of which we haven’t seen at least in the last 30 years.

So does this mean we should all pile into property investment? Well of course not, there are still challenges we face ahead, primarily in terms of affordability in the South East. At the current rates, even with rents rising it’s no question that making the numbers work in London for example will be much more difficult than before. 

There’s no doubt that the game has evolved, gone are the days when you could just buy anywhere, for most people it was usually within half an hour from where they live and still do very well in general. It’s much more about picking the right areas and taking a more analytical approach. In short, the industry is professionalising. 

When we talk about landlords exiting the market it’s not happening across the board evenly, the vast majority of these are made up of accidental landlords (people who inherited a property, moved out of their first homes and decided to let their property out etc). 

We see portfolio landlords remain resilient and continue to make acquisitions. Currently, around 18% of landlords own about half of all rented homes. The trends show this is set to increase in the near future.

The name of the game has also shifted. I see the past trend of investors taking advantage of cheap credit, and aggressively refinancing with low equity becoming much more limited going forward. The emphasis will very much be focused on strong cash flow.

So to succeed, it’s more important than ever to treat it as a business from day one, being very clear on what your objectives are and to structure things in the right way. I see that in times of uncertainty comes opportunity and the property market won’t be subdued forever. If you’re looking to get started to invest be sure to sign up for Property Academy’s list, I’ve got a lot of free resources planned to kick-start things ahead of 2024!

What are your plans for 2024 and beyond? Any feedback? Hit reply, I read all messages. Have a good rest of your weekend!

Hans