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Being a private landlord in Britain no longer makes financial sense, says Zoopla boss
Interview: Charlie Bryant on the future of buy-to-let and what Labour’s property market shake-up should entail
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Becoming a private landlord in Britain no longer makes financial sense, the boss of property listings website Zoopla has said.
Charlie Bryant, who oversees Zoopla’s parent company Houseful, has warned that individual buy-to-let investors are steering clear of the rental sector amid a combination of tax rises, high mortgage rates and red tape.
In their place will come pension funds and private equity firms, he said, as they seek to capitalise on the lucrative build-to-rent sector.
Factors fuelling the decline of Britain’s “mom and pop” private landlord sector include the removal of tax relief on buy-to-let mortgages and the 3pc stamp duty surcharge introduced on second homes in 2016.
These financial headwinds make being a landlord no longer the attractive proposition it once was.
Mr Bryant said: “Put that into the context of the potential returns from alternative investments, whether that is bonds, the equity market or, frankly, putting your money with National Savings and Investments (NS&I) and the attractiveness of owning a rental property as an individual private landlord, buying it for yield, is not there.”
The numbers back him up.
Figures from UK Finance show that the buy-to-let mortgage sector recently shrunk for the first time since 1996, when bespoke loans for property investors were first introduced.
This shift comes as Sir Keir Starmer’s Labour Government vows to rip up planning rules to build 1.5m homes across the country, potentially favouring corporate build-to-rent investors that can develop and manage apartment blocks with economies of scale.
Mr Bryant said: “Undoubtedly the next iteration [of the rental market] is, particularly with potential planning changes, will be larger, more corporate institutional landlords, under the build-to-rent guise.”
The build-to-rent model is already commonplace across the US and Germany, and has been growing fast in the UK.
Across Britain, the number of build-to-rent flats has increased more than 12 times over since 2015, rising from 7,200 to more than 90,000 today, according to JLL property consultants.
Another 90,000 are also in the pipeline as major pension funds such as L&G and Aviva forge ahead with investments.
This is still a tiny fraction compared to the total 4.6m households living in the private rental sector but the trajectory is clear.
Industry experts increasingly believe that build-to-rent will play a crucial role in Labour’s housing plans, particularly as record levels of immigration drive demand in the rental sector.
“Net migration remains high,” Mr Bryant said. “The UK remains a very, very popular destination for overseas students and migrant labour. We are still a very strong financial centre and therefore we get a lot of expats coming in.”
To tackle growing demand in the rental sector, Mr Bryant said the Government must build a variety of homes, including social and affordable rent.
“Building owner-occupied three-bedroom homes up and down the country is not going to solve the problem,” he said.
Houseful is the parent company not only of Zoopla but also of Hometrack, which provides valuation and risk services to almost all of the UK’s largest mortgage lenders, and online mortgage broker Mojo Mortgages.
As such, Mr Bryant has seen first-hand how regulations introduced after the financial crisis, such as limits on how many multiples of a person’s income a bank can lend, have made it much harder for first-time buyers to qualify for loans.
In terms of potentially reforming the mortgage market, Mr Bryant said banks should open up lending to more first-time buyers by using their rental payment histories as a way of assessing affordability.
“Could we take a lesson from some of the other geographies worldwide and be more aggressive on lending? Certainly loan-to-value lending is a lot higher in other geographies than it is in the UK,” he said.
“In the Netherlands, average LTVs for first-time buyers are above 100pc because they look at the borrower as much as they look at the collateral. I think we could certainly take a leaf out of that.”
Crucially, he believes Britain also needs to reform the purchasing process, as too often buyers are caught by housing chains collapsing.
“We have this peculiarly English thing about chains and everyone pulling out at the last minute, which can then collapse five other purchases,” said Mr Bryant.
“The costs associated with that – productivity, emotion, stress – are huge.”
This degree of uncertainty can be a crucial factor in deterring sales, he added, particularly for larger corporate buyers.
To streamline Britain’s “crazy” buying process, which involves buyers and sellers having to pay large fees to surveyors and mortgage brokers, he recommends a two-pronged approach.
Not only should the Government introduce rules to shorten transaction periods but it should also broaden access to Land Registry data.
Mr Bryant said this would allow everyone involved to see information about a property’s history, including any hidden service charges.
Having been drafted in as chief executive of Houseful since 2018, Mr Bryant has run the company under the ownership of US private equity firm Silver Lake Partners. Six years into their tenure, Mr Bryant insists there are no plans to sell.
“Increasingly, for large, growth-oriented private equity firms, they are significantly more focused on how to drive the greatest level of longer term growth,” he said. “For us personally, we have no specific immediate plans.”
What is more pressing for Mr Bryant now is the prospect of new wealth taxes under Labour, as Chancellor Rachel Reeves seeks to raise around £10bn to rebuild public services.
Mr Bryant said this would serve as a deterrent to global investors, including his bosses at Silver Lake.
“Clearly investors looking to invest in the UK will be very cognisant of what happens to things like capital gains tax and the extent to which it is attractive to run private equity investment firms in the UK,” he said.
As for Zoopla, it is currently tackling a new wave of competition in the UK.
Tensions in the market have heightened ever since US real estate company Costar bought OnTheMarket – the UK’s third-largest property listing website after Rightmove and Zoopla – last year.
This coincided with plans to invest hundreds of millions of pounds in the site to turn it into a market leader.
Despite this threat, Mr Bryant insists competition is healthy for the online listings market, which increasingly gains ground on traditional estate agents of old.
Yet underpinning his confidence may be the fact that Labour’s radical shake-up of the property sector, with the creation of 1.5m homes, will drive activity for Zoopla like never before.
“I would say the need to build new homes in this country is at least as urgent, or more urgent than it has ever been,” said Mr Bryant.