A buy to let property is a great source of passive income, but in light of the COVID-19 pandemic, can people continue to rely on buy to let properties as a reliable source of passive income?
The buy to let property market has the potential to offer many people a great source of passive income from rental payments and capital growth through price appreciation. Buy to let properties are also viewed as easy avenues of access into property markets, especially for first-time owners who are not yet able to purchase property in their desired location. These fundamental characteristics of the buy to let property market have remained unchanged during the pandemic, but that is not to say that the buy to let property market has remained unaffected by the pandemic. On the contrary, much has changed for those purchasing buy to let properties as well as for those renting.
The buy to let property market is migrating out of big cities
The work-from-home revolution and the severe impact of social distancing measures have significantly altered the buy to let property market’s future trajectory. This insinuates that the location of the buy to let property is everything. It seems that properties outside major towns and cities are in much higher demand as buy to let properties, and this is most likely due to the fact that so many people are now looking to rent properties in quieter and less busy locations which would make working-from-home and practicing social distancing that much easier. It appears that the buy to let property market is migrating out of major cities and into the countryside.
The number of new tenants have decreased significantly
The number of new tenants and renters has gone down significantly since the outbreak of the pandemic. This is due to several factors, but the main factor is that people simply cannot afford to take out new leases due to the sheer number of pay cuts and retrenchments that have occurred. To counteract this sudden decrease in the number of new tenants landlords have also been forced to lower rental prices in an attempt to attract new tenants. The situation is also further exacerbated by the fact that buy to let properties, along with residential homes and commercial properties, continue to suffer from logistical hurdles in terms of conducting views and the processing and finalizing rental and sales agreements.
These seemingly inconsequential factors have major impacts on the buy to let property market. The pandemic has forced landlords to significantly lower their rental prices yet tenants are still struggling to pay their rent in a timely fashion. This does not bode well for the future perspectives of the buy to let property market.
Prospective landlords are less inclined to expand their portfolios
Landlords across the board are in general becoming more and more pessimistic about their future prospects in the buy to let property market and are not over-enthusiastic about expanding their future portfolios. The main reason behind this shift in attitude is the fact that so many tenants are still struggling to make their monthly rental payments, months after the pandemic first tore through the nation. Regardless of the leeway landlords have given their tenants with regards to extensions on their monthly rental payments, numerous tenants still face challenges with meeting their payment deadlines, often for months at a time. It is expected that landlords will be more inclined to sell their properties rather than expand their rental portfolios in light of the impact the pandemic has had on the property market.
The final verdict:Overall, the buy-to-let market property has been negatively affected by the COVID-19 pandemic and those interested in real estate investing are thinking twice about it. The attractiveness of the buy to let property market is hitting a downward slope as many people wonder whether it is still worth entering the buy to let property market. This sentiment is underpinned by the fact that so many tenants are still struggling to make their monthly rental payments and the logistical hurdles of conducting viewings and finalizing sales still continue to plague the property market in general.