Buy-to-let property has been a lucrative investment strategy for decades. However, government figures show that total property income fell by 11% between 2016/17 and 2020/21, with some landlords unable to turn a profit in the aftermath of the pandemic.

With UK restrictions a thing of the past, buy-to-let property investments are still a viable option in 2023 and beyond. And with house prices falling, now could be the perfect time to seize a new investment opportunity with a few tricks and tips. 

What should buy-to-let landlords expect from 2023?

  • Falling house prices

With average house prices in the UK falling for the first time in months, landlords might choose to buy and invest in a different area and explore new opportunities. 

While some experts are speculating that the market might slow down, it does also mean that sellers and estate agents are being forced to accept bigger discounts.

  • Tighter margins

Mortgage rates have changed dramatically over the past twelve months. Over the course of 2022, many landlords opted to use interest-only mortgages to optimize their cash flow – but soaring rates could now become devastating for their profit margins. 

And any buy-to-let landlords close to the end of fixed deals should prepare for monthly costs to at least double. In particular, remortgaging could be the biggest challenge.

  • Rising rents 

The latest ONS data paints an alarming picture of rent affordability: while most median-income private renters in the UK are expected to spend around a quarter of their wage on rent, those in London could spend in excess of 40% of their monthly pay on rent.

Faced with higher mortgage costs, landlords might be left with no other option but to increase rent prices. However, if investments are made selectively in popular areas, landlords should be able to reap the benefits.  

How have changes to mortgage tax affected landlords?

Before tax charges were first reformed in 2017, landlords were able to deduct mortgage interest from their rental income – and could therefore pay tax just on profits. But between April 2017 and April 2020, mortgage interest tax relief was eventually replaced with 20% tax credit. 

Reduced tax relief means that landlords can no longer deduct mortgage interest from their overall rental income. There’s no workaround, but by letting out quality properties in an area with high demand, it’s still possible to turn an impressive profit.

Why is buy-to-let still a worthwhile investment?

Although recent changes show that you may earn less than you might’ve done in previous years, buy-to-let remains a profitable investment. You’ll first need to carefully weigh up the pros and cons – along with making sure that your personal finances are strong enough to start investing.

Working your way around the housing market can be a complicated game, but you can master it by pointing your investments in the right direction.