NLA talks down capital gains prospects as BTL confidence soars

Landlords’ confidence in capital gains has almost trebled over the past two years, according to the National Landlords Association (NLA).

Landlords’ confidence in capital gains has risen from 18 to 52% over the past two years, with a seven-fold increase in confidence in the UK’s financial markets over the same period (up from 5 to 37%).

However, the findings show that a third (32%) of landlords say they might not be able to meet their mortgage repayments if interest rates were to rise in the near future.

Despite its findings NLA is looking to talk down capital gains prospects and has warned against relying on capital gains as a primary investment strategy. The warning comes after the Financial Times recently reported the estimated capital growth of private rented housing stock to be of £177bn over just the past five years.

Carolyn Uphill, NLA chairman, said: “It certainly feels like a great time to be looking at buy-to-let a means of additional income but you cannot simply rely on the prospect of capital gains as an investment strategy.

“A lot is being made of capital growth but landlords must remember they are in the business of providing homes for people. It’s a risky investment and the prospect of capital gains is only realised if and when the property is sold.

“With house prices levelling off and inevitable rises to interest rates as the economy improves, anyone considering investing in buy-to-let should think carefully before taking the plunge. This means planning for the long term and looking to sustainable yields, not hoping for a windfall in capital appreciation.”

The news comes as the NLA launches the second part of its latest campaign; rent, risk resolve, which aims to highlight the potential risks of rising interest rates.