Buy-to-Let or Diversified Portfolios? Rethinking the Foundations of Long-Term Wealth

Buy-to-let property has long been the cornerstone of private wealth in Britain. For years, it provided reliable income, steady capital growth, and the reassurance of tangible ownership. Yet over the past decade, that confidence has been tested: successive tax reforms, rising borrowing costs, and tightening regulation have reshaped the landscape for landlords, while diversified portfolios have quietly compounded returns often with less cost and complexity. That leaves landlords wondering: is it worth still having a property to let?

To explore these shifts, we spoke with Rosie Bullard, Partner and Portfolio Manager at James Hambro & Partners, who outlines how buy-to-let investing has changed, the assumptions investors need to revisit, and how diversified portfolios can help support long-term resilience.

A Landscape That Has Fundamentally Changed

A decade ago, buy-to-let operated in conditions that made returns relatively forgiving. Borrowing costs were low, tax treatment was more generous, and regulation lighter. Those tailwinds have now largely reversed. Higher interest rates alone have transformed the economics of leveraged property, narrowing margins and increasing sensitivity to even small changes in costs or void periods ^[1].

As Rosie Bullard explains, “the tax environment has changed significantly against landlords, stamp duty is higher than it used to be, income tax on rental earnings has increased, and the ability to offset mortgage interest has been materially reduced.” The consequence is that property assets now need to work far harder simply to deliver an acceptable after-tax return.

By contrast, looking back over the ten years to 31 December 2025, world equity markets, as captured by the MSCI ACWI, have produced strong annualised returns of 12.75% per year ^[2].

Regulation, Risk and the Reality of Ownership

Alongside tax changes, regulation has altered the practical reality of being a landlord. Compliance requirements are more demanding, tenant protections stronger, and the process of regaining possession slower and more uncertain. For many investors, buy-to-let now resembles an operating business rather than a passive investment ^[3].

Recent policy changes are reinforcing these pressures, “a lot of regulation is now in favour of renters rather than landlords,” Rosie notes. The Renters’ Rights Bill introduces further reforms, including the abolition of Section 21 “no-fault” evictions and stricter property standards. Early indications suggest the changes could further reduce rental supply, particularly among smaller landlords. In a national survey of 1,500 landlords, 25% said they plan to sell at least one property in the next 12 months, with 49% citing new legislation and 32% pointing to higher taxes as the primary drivers ^[4]. Rather than a short-term reaction to market conditions, this points to a structural reassessment of buy-to-let economics.

Investment portfolios, by contrast, operate within a highly regulated framework but without personal compliance, tenancy, or property maintenance obligations.

The Assumptions Investors Still Carry

Despite these changes, many investors continue to assess buy-to-let using assumptions formed in earlier decades. The belief that property will reliably deliver both rental income and capital appreciation remains deeply ingrained, particularly among those who benefited from long periods of rising house prices ^[5].

“There’s often an assumption that property will always deliver capital growth alongside rental income,” Rosie says. “Historically that has been true in many periods, but we’re now in a very different interest rate and liquidity environment.” Rental income may still feel predictable over the short term, but capital appreciation is far less certain once borrowing costs, taxation and maintenance are taken into account.

How Diversified Portfolios Take a Different Approach

Diversified investment portfolios address these challenges from a different starting point. Rather than relying on a single asset or income stream, portfolios draw returns from multiple sources across asset classes, regions and economic drivers. This diversification reduces dependence on any one outcome and allows portfolios to adapt as conditions change ^[6].

In Rosie’s view, the distinction is not that portfolios eliminate risk, but that they distribute it more effectively. “In many respects, portfolios and property are similar, you still have capital growth and income as the two components of total return.” The difference lies in how those components are generated and how much control investors have over their structure.

Liquidity, Visibility and Flexibility

Liquidity is one of the clearest points of contrast between property and portfolios. Property transactions are slow, costly and highly dependent on market conditions at the time of sale. Portfolios, by contrast, can usually be adjusted or partially liquidated within days, providing flexibility when circumstances change ^[7].

“If you want flexibility within your asset base, property can be challenging,” Rosie explains. “You can’t sell part of a property portfolio easily, whereas an investment portfolio can often be liquidated quickly.” For investors approaching retirement, planning major expenditures or managing changing family needs, this flexibility can be a decisive advantage.

Visibility also plays an important role. Property values often feel stable because they are not reassessed daily, but that stability can mask underlying risk. Portfolio valuations fluctuate more frequently, which some investors find uncomfortable, but that transparency supports clearer planning and more informed decision-making.

Tax Efficiency and Long-Term Outcomes

Tax treatment further differentiates the two approaches. Rental income is taxed as income, often at higher marginal rates, and can push landlords into less favourable tax bands. Portfolio returns, by contrast, are frequently driven by capital growth, which is taxed more favourably and can be managed strategically over time.

Portfolios also allow access to tax-efficient wrappers that are simply unavailable to property investors. As Rosie puts it, “ISAs are an extremely efficient way to save and invest, and you simply can’t wrap a property into an ISA.” Over the long term, this difference can materially affect net returns and overall financial resilience.

Rethinking the Role of Property

None of this means property no longer has a role in long-term wealth planning. For some investors, its tangibility and familiarity remain valuable, and property can still play a part alongside other assets. The more important question is whether buy-to-let continues to justify its complexity, cost and risk within a modern portfolio.

As Rosie concludes, the key is perspective: understanding after-tax returns, liquidity, time commitment and how each asset contributes to resilience across an entire financial plan. For many landlords, revisiting long-held assumptions may be the most important step in deciding what role property should play going forward.