Is the UK on the brink of a mass landlord exodus? It may seem like an ominous question, but ask people who own a portfolio of buy-to-let (BTL) properties and you’ll soon find out that being a landlord is not what it once was.
There is a simple reason for this: landlords have been hit with a steady barrage of regulatory reforms over recent years, which has made the process of managing a BTL portfolio more complex, time-consuming and expensive.
In 2019 alone, the government introduced changes to buy-to-let mortgage tax relief and further stamp duty reform, not to mention amends to Section 21 regarding unfair evictions and the introduction of the Tenant Fees Act.
While regulations play a vital role in ensuring the interests of tenants and landlords are not exploited or taken advantage of, the volume and extent of recent reforms suggest the Private Rented Sector (PRS) is unfairly weighted against landlords.
In one respect, I do understand the Government’s position. The imbalance between housing supply and demand has resulted in rising property prices and affordability issues for first-time buyers and those looking to move to a bigger property. Targeted regulation of the PRS is aimed at curtailing BTL investors from purchasing excessive amounts of residential property.
However, this begs an interesting question…
How much regulation is too much regulation?
To find out, Accumulate Capital, recently surveyed over 750 landlords, all of whom own three or more residential properties in the UK. We asked them just what they thought about the PRS and whether changes in this space would alter the way they are managing their property portfolios.
Alarmingly, the results found that over half - 53% - of landlords would not have purchased their properties in the first place had they known just how regulated the PRS would become.
What’s more, 37% plan to sell at least one of their properties this year; of those, 61% say they are doing so as a result of increasing regulations and taxes. Suddenly, the prospect of a landlord exodus doesn’t seem all that outlandish.
That’s not to say landlords will be retreating from property investment altogether. Real estate remains an attractive asset, which is why alternative property investment opportunities like debt investment and development finance are rising in popularity. The aforementioned Accumulate Capital research revealed that over a fifth of landlords (21%) are considering these new investment avenues in 2020.
Targeting landlords is not the solution
If the government wants to rebalance supply and demand in the property market – which they need to do in order to improve housing affordability and availability – its top priority should be ensuring more residential developments are being built across the UK. That’s why I am keen to see new measures being introduced to make sure the UK’s property developers are provided the support they need to fund and construct more new-build homes.
The upcoming Budget on 11 March will reveal if the new government is going to change its approach. At the very least, I encourage them to take a step back and examine how current regulatory reforms are affecting landlords and the BTL market more broadly. Hopefully they will see that targeting landlords will not resolve some of the pressing challenges currently facing the real estate market.
Paul Howells is CEO of Accumulate Capital.