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Is the buy-to-let market as good as dead and buried?

Investors have long turned to residential property as a means of supplementing their income, supported by strong demand from tenants and stable yields.

But buy-to-let is no longer the investment of choice for many people, including financial journalist Rupert Hargreaves, mainly due to tax and regulatory changes over the past couple of years.

There is plenty of evidence to suggest that the majority of landlords still view buy-to-let as a money-making asset class, but there are undoubtedly those who feel now is the right time to exit the market.


A number of tax and regulatory changes have hit landlords’ profits over the past couple of years, including the scrapping of the ‘wear and tear’ allowance, the introduction of the 3% stamp duty surcharge, and mortgage tax relief cuts which simply do not add up for buy-to-let investors.

Landlords used to be able to deduct mortgage interest and other finance-related costs from their rental income before calculating their tax liability.

However, this interest relief is being slashed from 100% to 0%, with the change being gradually phased in between April 2017 and April 2020, and as a consequence Hargreaves thinks that buy-to-let is ‘dead’.

The phasing out of mortgage interest relief means that those filing their tax returns before the 31 January deadline will only be able to offset 50% of their mortgage costs against their profits (financial year 2018-19), falling to 25% on 6 April, and then to 0% in April 2020.

This would see the amount of tax owed by some landlords’ potentially double or even triple, which is why Hargreaves is advising people against the idea of investing in buy-to-let.

Writing for The Motley Fool, he stated: “One of the reasons why owning a buy-to-let portfolio can be so profitable is the ability to gear up your money with a mortgage.”

He continued: “With the outlook for the buy-to-let sector becoming more uncertain by the day, I think it’s now time to avoid the asset class. Using borrowed money to improve returns in a bull market is an excellent strategy, but when the tide turns, losses can mount quickly.”

The journalist makes reference to the fact that asking prices are currently falling, as reflected the latest Rightmove data.

“It looks to me as if buy-to-let is dead money,” he added.

However, with many sellers becoming increasingly realistic and recognising that values have become somewhat out of kilter with what many purchasers are prepared or can afford to pay, Hargreaves fails to mention the fact that some astute investors are flexing their muscles and negotiating significant price reductions when acquiring property.

He also fails to acknowledge that rents are rising due to the drop in the supply of properties to let on the back of a jump in the number of landlords exiting the buy-to-let market.

Many experts believe that the widening supply-demand imbalance in the buy-to-let market will inevitably push up rents in 2019 and beyond.

Countrywide estimates that rents are likely to rise 2.5% in 2019, followed by growth of 3% in 2020 and a further 2% in 2021.

A separate prediction report issued by RICS suggests that rents will increase by 15% over the next five years.

Is the buy-to-let market really as good as dead and buried?

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Poll: Is the buy-to-let market as good as dead and buried?


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    Would this guy be part of Hargreaves Lansdown the people that sell private pensions ?? well he would like us to believe B T L is dead wouldn't he, so we invest with him, I'll stick with B T L thanks all the same mate.


    Well said, I thought there was a hidden agenda in the post!

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    I think that it is a good idea to have a balanced portfolio.
    My financial advisor has actually achieved a better percentage growth with my private pension than some of my let property.

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    I have grown a £12000 initial deposit on a £48000 flat which generated £600 per month gross rent 20 years ago into over £2 million equity in a £3 million portfolio generating over £20000 per month gross rent. I doubt many stock market investors could claim to have turned £12000 into £2 million over the last 20 years and have £20k per month dividends. As long as we can get gearing through cheap mortgages I believe btl will beat the stock market. My worst investment was an Equitable Life pension scheme, so I'm done with"balanced" portfolio planning!

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    Surely someone has noticed the quite inaccurate statement about mortgage relief? It is simply being reduced to 20%, not removed altogether! This makes no difference if you are still on basic rate tax (and the threshold is going up to £50000 next year from £45000 last year). If you do end up paying higher rate then it basically adds 20% to the effective rate of interest. Given that rates are so much lower now then even three years ago, finance is still cheaper than it was then ... and rents have gone up in the meanwhile. There are downsides if you are looking for income generation, since property prices and stamp duty have also gone up, meaning that it is more expensive than it was to start up and to run a new buy to let, and for those that have furnished properties, the 10% allowance is sadly missed.


    It hits portfolio landlords with many mortgages like myself so it will catapult u into higher rate if u have 100k mortgage interest per year for example that will be taken as income and added and taxed at high rate with a 20% credit. What the government don’t realise is we house the most tenants so one landlord can affect 100 families and these tax bills will be unaffordable and bankrupt portfolio landlords and create mass homelessness it is a disaster in the making mark my words

  • PossessionFriendUK PossessionFriend

    Is it DEAD, or Alive - kinda " in hospital with a chronic disease of Osborne'itis and poor prognosis, " I'd say - which doesn't bode well for Tenants !

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    Yes, I read read an article in the Guardian complaining about availability going down and rents going up saying that landlords we ripping off councils who had no choice but to give temporary according to more
    and more homeless people. It turns out that landlords are evicting them so that they can sell up as it was no longer worth their while to provide rental accommodation, or were trying to raise rents to compensate.

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    It is effectively dead in residential with mortgages and a 40% tax payer.
    Yields are too low to equalize tax in this scenario, only HMO and SA is viable.
    Portfolios are built over 10-20 years, and once they are gone, they are gone, unless S24 is abolished.
    The only other way is Ltd company where it doesn't apply. So hold on a personal portfolio up-to the new £50K threshold, then build again in Ltd. Is the only survive.
    Of course as the sell off continues, more and more become homeless, as they couldn't afford to buy anyway.
    In Coventry, cost of emergency housing has risen from £1.2m a year too over £4.3m. You can't conceive that the taxation is enough to offset these costs nation wide, so it will now be coming a net loss to the treasurey....it must be UK wide!


    It depends on the area ... I am in the Humber Area where the yields are still ok if you play it right. I have four small HMOs and three whole property lets, hopefully getting the next one soon. I usually look for something undervalued and get most of my investment back remortgaging it later. However, I notice that the amount I can get for a room has gone up considerably if I wanted to take advantage of that.

    Obviously it's different in other places as most of the return is via capital growth and the rent just about covers running costs, so if there is a property downturn then these people could be in serious trouble with negative yields and negative capital growth! I think in my case I would just carry on as usual, maybe charge a little more rent, unless demand for rental property fell through the floor or the tax regime became impossibly hostile.

    The reduction in interest rates is quite noticeable. When I started in 2015, it was 3.6% for a 2 year fee free fix and 4% for a five year, but now it's about 3% for a 5 year which is about 25% less. If you are on higher rate tax, the effective rate for this is still only 3.6% and only one lot of agent fees in 5 years. I'm still a bit sceptical of setting up an Ltd SPV as the extra work and bureaucracy, higher interest rates and other costs of running a business may not be worth it. You may get full tax relief but you have to pay for business banking, file trading reports, and pay both corporation tax and dividend tax if you take any of the profits out. One big advantage is that if you want to sell the property as a going concern, then you just sell the (shares in the) company rather than the actual property, which continues to be owned by the company. This is vastly quicker and cheaper than transferring property, and presumably avoids future SDLT.

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    It very much depends where you are as a landlord, i was self employed in the motor trade from 23, i took an instant dislike to the spivs trying to stitch me up with private pensions, so i done a D I Y pension, over 30 yrs i built up a portfolio of 16 properties slowly and all bought for cash, today the income is around 80k, but as they are jointly owned with my wife we are both basic rate tax payers, now aged 65 i enjoy a very comfortable life style with no borrowings, so B T L has worked really well for me, and it can still work well for self employed people looking to provide for themselves in later life, it's not a get rich quick scheme, but the best form of savings account / pension scheme out there.

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    Mortgaged portfolio landlords in a partnership can incorporate using BICT without refinancing and playing SDLT and continue to deduct mortgage Interest and all other business expenses. This is very useful for landlords with larger portfolios. I have done it and am now running my portfolio through ltd company. I am a full time professional landlord

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    That's sounds very interesting! Unfortunately I own and run mine in my sole name and my partner does not have anything directly to do with it.


    There are many options if u send me ur email I would be happy to talk to you and point you in the right direction


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