Stone terraced houses in Clifton, Bristol, England

Property & Real Estate -

Key factors impacting the Buy-to-Let market over the last 12 months

Experts highlight that interest rate hikes, global events, and demand for premium assets have shaped the BTL market.

In a panel discussion lead by Mark Lucas Director Head of Arbuthnot Latham’s Bristol Office, experts Clare Day from HCR Law, Craig Wallace from Knight Frank, and Arbuthnot Latham's own Paul Clifton, Director of Wealth Planning, James Hilton, a regulated mortgage and lending adviser, and Angela Niering-Wren, a real estate lending specialist, provide insights into the most common issues affecting the buy-to-let (BTL) market in the last 12 months.

Their conversation examined how interest rate fluctuations and broader macroeconomic factors have shaped investor behaviour and influenced market trends over the past year.

Read on to explore the views shared by Clare, Craig, and Angela.

Interest rates

Clare opened the discussion by addressing the impact of the government's fiscal policies, which initiated a series of interest rate hikes.

She observed, “We saw activity levels fall. People were nervous as to where that was going,” illustrating the market's immediate response to the budget changes. According to Clare, despite initial hesitation, the property market showed inherent resilience as activity began to pick up a few months following the shocks.

Clare also shed light on the external global influences exacerbating the market's challenges, such as the Ukraine conflict, which escalated living costs and, by extension, the costs associated with property ownership.

Highlighting the ongoing series of impactful events that continuously shape market dynamics, she remarked:

“In my 20-plus years in property, there always has been something influencing the UK market. We have had Brexit, we have a war in Ukraine, and the UK election.”


The markets

Craig provided a granular analysis of how the market responded differently based on asset types and locations.

“We have seen a real shift towards the better asset types, the better locations, so there has been a sort of flight to quality there,” he explained. This 'flight to quality' meant that while overall yield shifts were noted across the market, premium assets in desirable locations experienced less volatility and continued to attract investment.

He also pointed out the growth in the rental sector, particularly in cities like Bristol, where rental growth rates of 7 to 9% were observed over the year. This rental strength helped to cushion some of the negative impacts on property valuations due to the rising interest rates. “Some of our portfolio and BTL valuations have not dropped as far as we would have thought,” Craig noted, emphasising the nuanced impacts of economic factors on different market segments.


Lending – a more collaborative approach

From a financial perspective, Angela discussed the impact of rising interest rates on lending practices and borrower agreements. She pointed out the severe strain on borrowing covenants, which were often set under quite different economic conditions.

“With existing borrowing, many covenants that were set at the time when the bank rate was around 0.10. Fast forward to September 2023 and it is sitting firm at 5.25%. The covenants were seeing stress early in the rate cycle.”

Angela highlighted the strategic financial management necessary to navigate these changes, including renegotiating terms and implementing loan modifications.

“It is about looking at what the lender can do, and what the client needs to do to address that. It is about talking to the clients and discovering what is in the art of the possible and working with them,” she said, underscoring the need for a collaborative approach to managing these challenges.


Views on the future outlook

Clare, Craig, and Angela collectively agreed that while the BTL market continues to face significant headwinds, it also presents opportunities for those who are prepared to adapt their strategies accordingly. The current economic environment demands a balanced approach, blending caution with proactive opportunity-seeking.

Craig encapsulated the forward-looking perspective:

“Navigating the current economic volatility requires a balance of caution and opportunity-seeking. By focusing on high-quality assets and adaptable investment strategies, investors can position themselves favourably for when the market conditions stabilise.”

This approach is crucial for investors navigating economic uncertainty while positioning themselves for future growth.



Property Market Panel

For further insights from this enlightening panel discussion, including an in-depth analysis of market dynamics, regulatory changes, and more, be sure to explore our other featured articles. Dive deeper into the expertise shared by our panelists.



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Commercial Banking  •  Real Estate Finance  •  Buy To Let