Is Covid-19 actually harming the buy-to-let market?

26 February 2021 | Investment

Is Covid-19 actually harming the buy-to-let market?

With the pandemic heavily impacting interest rates, people are searching for a more lucrative return on their investments.

Research by insurance and personal finance comparison experts Quotezone reveals that 85% of those looking for landlord insurance own just one property – suggesting this is a buy-to-let investment rather than their full-time job.

The data, which covers a sample of landlord insurance quotes from 2019 to 2020, suggests redundancies and furlough has perhaps created an emerging trend of small and first-time landlords. 

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Although the majority of the 19,000 landlords Quotezone sampled have owned their property for five years or more, there is a recent spike emerging, with properties owned for ‘less than one year’ seeing a 22% year-on-year rise during the pandemic. 

The data also showed that the average age of a landlord in the UK is 51 – people likely at least a decade from retirement and looking to invest their skills and savings in a more long-term asset that may offer higher returns. With only 52% of landlords using cash to purchase during 2020, the lowest figure on record, buy-to-let is an increasingly viable option for many UK buyers.

Additionally, the average rent landlords can expect from their investments differs across the UK. Data from Statista revealed that Greater London has the highest average at £1,556, while the cheapest region is the North East where the average rent is just £539. The UK average is currently £832.

The best interest rate available from savings accounts currently stands at just 3%. By contrast, the average rental yield in the UK is currently 5.2% and buy-to-let property in some parts of the country offers rental yields in excess of 7%.

However, there are costs a landlord needs to consider such as a managing agent, utilities inspection reports and certificates, landlord licence (£500 every five years), safety equipment such as fire alarms and extinguishers and routine maintenance to the property. 

Landlord insurance is another vital element but by comparing policies on comparison platforms, landlords can see there are competitively priced policies available.

Greg Wilson, founder of Quotezone, says Covid has created a ‘temporary shopping spree’ within the housing market with the government’s stamp duty holiday.

“However,” he adds, “I fear this temporary boost in sales may be short-lived as the economic aftermath of the pandemic is yet to be revealed and the stamp duty holiday is due to expire at the end of next month.”

“Rental properties haven’t gone untouched by the crisis, with many tenants on furlough or facing redundancies and social distancing creating physical barriers to the properties making routine maintenance and repairs difficult.”

“It is perhaps more important than ever to ensure landlord insurance policies are thorough, accurate and up to date so that landlords are fully protected should a claim be needed.” 

Policies vary from one landlord insurer to another, but in general can cover any damage to the building caused by insurable events like fire, flood, storms, subsidence, theft and vandalism. 

Landlord contents insurance, landlord liability and unoccupied property insurance can also be added as well as extra tailored features such as rent guarantee insurance, landlord home emergency cover and legal expenses.

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This post has originally been featured in Property Investor Today.