The Government’s reduction of landlord buy-to-let tax relief to the 20% basic rate is a major factor for half (50%) of all landlords currently looking to sell, according to a sentiment survey of more than 1,200 landlords conducted by Your Move and Reeds Rains.
The tax changes, announced as part of the summer Budget, are proving a major concern for buy-to-let investors. Currently, 9% of landlords think it’s a good time to sell up, with the tax reforms influencing their decision more than any other factor. Many fear letting out a property will become far less profitable when the reforms start to come into force in April 2017, and they are now considering leaving the sector as a result.
This loss of enthusiasm is even dampening the optimism of the 31% of landlords who think that now is a good time to buy rental properties. Overall two-fifths of UK landlords (44%) believe investing in buy-to-let property is more complicated than it was six months ago.
This is due to more rigorous regulation, also introduced as part of the Budget, which includes requirements for landlords to check their tenants’ immigration status before they let their properties. Almost a fifth of landlords (19%) are daunted by this task, and now feel unequipped to let out their houses without the support of letting agents to manage their investment.
Nearly a quarter of landlords (24%) believe the legislation on letting out properties has become more confusing, with more than one in ten (11%) feeling that they don’t fully understand the current regulations. These changes are denting landlord confidence, and general disenchantment with the letting industry was an important factor for 23% of landlords who think now is a good time to sell.
Adrian Gill, director of Your Move and Reeds Rains, said: “Landlords could be forgiven for feeling a little deflated at the moment and its worrying to see this may motivate many to reconsider their investment. The Government’s tax changes appear to be making investing in buy-to-let less attractive because of the seemingly smaller profits margins on offer in the future. If a tenth of landlords do decide to leave the industry, this would seriously shrink the number of properties available for tenants. At a time when tenant demand is only rising, shorter supply will only translate into increased rents. This may mean landlords are underestimating the likely pace of future rent rises.
“The government need to cut the red-tape involved in providing homes for renters if they hope to maintain a healthy supply of rental properties. With the Bank of England keeping a wary eye on the buy-to-let market, further regulatory interference may only make landlords’ and tenants’ lives harder. We need landlords to stay in the market and invest further in the sector, in order to match future demand.”