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TODAY'S OTHER NEWS

BTL market has “strong future”, say landlords

Research by Aldermore shows that over half the UK’s buy-to-let landlords (52%) expect today’s changes to stamp duty and buy-to-let mortgage tax relief to have no real impact on them.
 
The research, carried out amongst 1,000 landlords by YouGov on behalf of Aldermore, explores how the recent changes to buy-to-let, which came into force on 1 April, have affected landlords, including whether they would raise rents, sell their properties and what they thought the future was for the private rented sector.
 
Seven in 10 respondents expect the number of tenants in the private rented sector to increase over the next five years, but a third (33%) of landlords feel the overall value of the buy-to-let market will decrease over the next 12 months.
 
The majority of landlords (63%) in Britain own only one property that they rent out, with 95% of respondents owning five or fewer properties.

Charles Haresnape, group managing director for mortgages at Aldermore, said: “These figures show that the majority of landlords believe there is nothing to fear for the future of the buy-to-let market in the UK. It is clear that the vast majority of landlords fall into the ‘accidental landlord’ category, and as such would be unaffected by upcoming changes as they are not actively looking to build a rental portfolio.
 
“With 70% expecting the number of people in the private rented sector to rise over the next five years, it is vital that regulation does not stifle this hugely important segment of the UK housing market, particularly at a time of significant supply constraints.
 
“The majority of our buy-to-let customers are committed long-term landlords. While they will obviously not welcome an increase in stamp duty, over the course of a 20 year investment the sums remain relatively small and are unlikely to significantly affect the buy-to-let market.”

  • Andrew McCausland

    Sorry Charles, but this research only shows that the majority of landlords in the UK are either unaware of the affects of the planned changes or are deluded. Section 24 of the Finance Act is a game changer and the sooner the PRS faces up to the challenges of this the better.

    Many smaller scale landlords in the lower tax band will be pushed into a higher tax bracket. This change to their marginal rate will have an affect on the tax they pay on BTL or dividend income from elsewhere. The addition to their "apparent" pay of adding in the gross rental income from their property may push them past the thresholds for working tax credits and family allowances.

    For the first time in UK business history people will be asked to pay tax on money they have not made. Often paying more in tax than the income they have made from their property. I know of a number of landlords in my area who have a number of properties and will be pushed to the edge of bankruptcy by these regulations. They can't roll their existing stock, owned in personal names, into limited company structures as they would have to pay higher rate SDLT payments and CGT on transfer.

    They are being forced to sell their investments as a direct result of this. However, the timescales involved mean they can't do so in an orderly manner over time and so will get hit by excessive CGT payments. As long term investors they have taken further advances on their mortgages over the years. Therefore they can't sell the property, repay the mortgage and pay the CGT bill without effectively paying cash into the deal - whilst losing the income from the property once it is sold.

    They have to pay if they keep the property and they have to pay if they sell it.

    If you are in the lucky position to be mortgage free then you are in the clear. For the majority of landlords, especially the small scale investors who are the backbone of the PRS, this can destroy their investment plans. If you are in your 40's or 50's and plan to use your existing BTL investment to fund your retirement then think again.

    This Conservative government has attached the people it says it wants to help - the aspiring, hard working individuals, who want to supplement their income by working additional hours as a landlord, who plan ahead and save for their retirement. Those on middle incomes, not the super rich. If you have an investment property on a mortgage you need to be fully aware what these changes mean to you. Despite the survey results quoted above, it will change things for you Mr and Mrs Landlord.

    We need to fight these unfair tax changes now.

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    Andrew, You are totally right. We have a Government that is trying to remove the middle class, you can be rich or poor nothing else.
    It is clear to me that what you are saying is correct, and I struggle to believe that Landlords have done there maths on this one. Eyes are closed because people only think of today and not the effects of tomorrow.
    I would actively support anybody who stands up and fights this. Its the destruction of a basic business principle and a punishment for those who work and save.

     
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    I agree with you Andrew, we have taken plenty of advice from tax experts and know what's coming so I find this survey surprising. I think what the government is doing is disgraceful, we have saved and worked hard to build a better future going without things now to ensure a better earlier retirement only to have it all taken away from us by a deluded Chancellor. Why did we bother?

     
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    Well said Andrew. Landlords need to wake up.

  • Daniel  Green

    Yes I agree with this
    I'm a landlord in NW London and the recent changes will have a huge affect on me. Some of my flats are only marginally profitable and the changes to the wear and tear allowance alone will make them unprofitable (I will sell). The average yield in NW london is around 3% and with the cost of capital of well over 4.5% for me (one of my mortgages is 5.8%) I think the market will be unsustainable for me and many other landlords. That's without the changes to tax treatment on interest payments and stamp duty.
    The impact on the market will be enormous and the sector will suffer. In sure that rents will increase too.
    What nobody is talking about is the impact on social housing. As the government is moving from public to private housing, what will the impact be for social tenants if private landlords are pulling out of the market?

  • Nick Gordon

    It would be interesting to see their sampling techniques as all the landlords I have spoken too are very concerned about the changes.

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