Is Buy to Let Worth it in the UK Property Market

By : europeanproperty

While regulatory changes in recent years have made buy to let less attractive to some investors, for others the prospects of strong rental yields and capital gains in certain areas of the UK still make property a good investment.


While no investment is without risk, investors who make savvy decisions and take a long-term view of their investment can see their property perform. We take a look at some of the pros and cons of investing in buy to let property in the UK market.


Current Housing Market in the UK


2021 was a record-breaking year for the UK housing market. House prices increased to their highest ever levels, and, as a result, landlords saw higher returns than ever before. For those considering a buy to let property, the future prospects look good too, and Savills predicts that capital growth could be up 13.1% by 2026, fueled by economic growth and a shortage of housing stock.


Rents, too, are on the rise across the UK. The average UK rent now sits at £1,053 per calendar month and in 2025, this is tipped to increase 17%. With strong capital gains and robust rental yields across the UK, now can be a great time to invest in buying to let.


Is it worth being a landlord in the UK in 2021?


Any potential landlord needs to carefully research local markets and understand which properties are most in demand to ensure their property is a success. The benefits of investing in buy to let property include the ability to generate monthly rental income. Rental yield will vary depending on the property location, but in some areas of the UK like Liverpool and Bradford, yields of 8% are possible.


Owning a property also gives landlords the ability to gain capital growth as the property increases in value over time. If you’re ready and willing to go through the buying process, undertake any necessary improvement work and find tenants, you can well be on your way to making money through property investment.


What are the Drawbacks of Investing in Property?


It’s important to get a handle on the real-world costs involved before making any investment decision and buy to let property does come with a tighter squeeze on profits than in previous years. While getting the best buy to let mortgage rate will depend on your situation, most lenders require 25% of the property price down as a deposit, which can often be a large sum of cash to get hold of.


Since 2016, anyone purchasing a second property is subject to an additional 3% stamp duty tax. This means that on a £200,000 purchase, a property investor will pay £6,000 more than someone buying their own home. When it comes to selling, buy to let investors face a larger tax bill on any profit. The Capital Gains Tax rate on residential property is 28% for higher rate taxpayers and 18% for basic rate taxpayers (compared to 18% and 10% respectively, on other assets).


Best Buy to Let Areas in the UK


Where might first time buy to let first time buyers look to find property with good yields and strong capital gains prospecs in the UK?



  • Leeds is already a hotspot for property investors and continues to offer strong prospects with rental prices set to increase 14.2% by 2025 and overall economic growth predicted to increase 21% over the next 10 years. The iconic Southbank project is transforming the city and home to plenty of iconic property developments enabling investors to make the most of future capital gains.



  • A top city for UK property investors, Manchester is set to benefit from the north-west’s 28% house price growth by 2025. Properties in the Salford Quays Waterfront, home to MediaCityUK, are in high demand due to strong yields and capital growth projections.



  • Commuter towns in close proximity to central London are set to be the next big thing in property investment. Just 50 minutes from London and undergoing a dramatic renaissance thanks to a £770 million regeneration scheme, the last few years have proved Bracknell’s appeal and popularity and plenty of developments are letting investors make the most of this opportunity.


When considering whether buy to let in the UK market is still worth it, it’s worth noting that profits aren’t as lucrative as they once were. However, with plenty of areas offering decent yields and strong capital growth prospects, investing in the right place at the right time can see investors make good returns down the line.



How Have Buy to Let Profits Changed?


Buy to let comes with tighter profit margins than previous years. Since 2016, a 3% stamp duty surcharge applies for those investing in buy to let property, and mortgage payments can no longer be fully offset against income tax on rent. Investors also face higher capital gains tax when they come to sell their property.


How Much do you Need to Buy to Let?


The total amount you need to invest in buy to let property will depend on the area and property you are investing in. As well as 25% of the property price as a deposit, you’ll need to keep in mind the cost of any improvements and upgrades necessary to make sure the property meets regulations as well as tax you are liable for.