This year has seen record numbers of landlords selling their BTL properties, in response to regulatory changes and the economic uncertainty, post Brexit.
Many landlords have exited the BTL market for good following the chancellor’s new taxation rules which have seen a 3% surcharge on stamp duty from April last year and the reduction in tax relief on buy-to-let mortgage interest fall from April 2017.
A recent RLA survey shows this trend is set to continue with 22% of landlords planning to sell at least one of their properties over the next 12 months, while less than a fifth said they are planning to buy additional buy-to-let properties.
So should more landlords be selling up and investing their money in other asset classes? Alternatively, should they sit tight and ride out the storm?
It is widely recognised that BTL property is a medium to long term investment. If we take a long term view, it is easy to see how property performs so well compared with other asset classes.
Over the last 35 years, for which accurate house price index information is available, house prices have increased 11% per year on average. The longer landlords can hold onto property, the better.
Investors that acquire property in the best BTL hotspots in the UK can enjoy yields of between 8-12%, excellent capital growth and steady rental income.
The bottom line is that landlords should not sell their properties unless they can get a better return elsewhere. However, if they think that the long term potential of an area is not very good, then it’s best to sell.
But before landlords put their property on the market, it is worth investigating if you can remortgage; raise the rent; repurpose the property into an HMO to boost yields; or renovate/refurbish it to attract different tenants. There are plenty of mortgage brokers that can provide refinancing for property portfolios, which may be much more attractive than selling up.
The best time of year to sell BTL property is March-June and September-November. Ideally, landlords should sell when they don’t actually need to. It's best to give the property a makeover with a lick of paint, new carpets and may be a new kitchen to maximise the selling price.
Peter Armistead is the head of Armistead Property.