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New research from the bank Handelsbanken suggests some landlords will reduce their portfolios if economic conditions worsen.
Almost 60 per cent of landlords say they are preparing to increase rents to compensate for higher costs, with a fifth saying they are planning to sell some of their portfolio to directly combat the cost of living crisis. Around a third say they are looking for ways to make their properties more energy-efficient to combat rising fuel costs.
The study illustrates the impact that rising energy bills and the cost of living squeeze are having among smaller professional landlords. Those with four or five properties are twice as likely to be making their properties energy efficient for instance, compared to those with more than 10 properties.
The study also shows that just over a third are cutting back on buying properties in cities as the market adjusts to changing employment practices, with more people working from home.
Almost all respondents say the current market outlook has impacted their portfolio/ investment strategy in some way, with just over half concerned they will experience longer voids.
Some 21 per cent of landlords report that one or more mortgage deals have fallen through, with 40 per cent adding their lender has increased the loan rate on one or more properties in their portfolio.
As a result, 45 per cent say they are planning to purchase lower-value properties to remain under the Stamp Duty Land Tax threshold to combat rising costs. There could also be knock-on effects on tenants as a quarter of landlords say the current economic environment will affect the maintenance and refurb programmes of their portfolios.
James Sproule, UK chief economist at Handelsbanken, says: “The property market is entering a period of increasing uncertainty, with house prices in some areas already falling and a rising regulatory burden being seen by some landlords as a reason to reduce their exposure to the market.
“While the ongoing cost of living crisis might be seen as the driving factor in the buy to let market, equally important are the post-pandemic movement back into cities, potential buyers delaying purchases and thus looking to rent, and fewer properties, meaning those who do persevere, are likely to see higher yields. Savvy landlords are using the changes to stamp duty to cost-effectively reshape their portfolios and invest in energy efficiency, something which has become an ever greater concern of potential tenants.”
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Well I am in the “ sell” camp, all the white noise will not deflect me. The decision has been made. The only thing to decide is exactly when and how…. God help the councils.
Right now I'm in the see what happens over the next few months camp.
If remortgage rates stay at the current level or go up again it's going to have to be a case of significant rent increases or selling at least one, maybe two. Probably the ones I have at LHA level rent as the CGT is less painful on some of them and they're either unencumbered or coming up to remortgage, so no early mortgage settlement penalties to factor in. As the rent is unrealistically low on those it's highly unlikely they could be sold tenanted so it would involve Section 21 and presumably the Council advising the tenants to stay put until the bailiffs arrive.
Selling any of the properties that I've owned longer would be fairly pointless as the CGT would take too much of the equity and the tenants pay proper rent anyway with enough tenant turnover to allow rent increases on new tenancies regularly.
The hope I have is that the government realise how problematic Section 24 is in conjunction with rising interest rates and return the PRS to a traditional taxation system. That would go a long way to retaining viability and keeping rent increases more in line with pay increases.
Also increase LHA so there would be some chance of selling those properties tenanted. Right now the rent is far to low to fit BTL mortgage lending criteria unless a buyer had a huge deposit.
I'm in the wait and see camp with you Jo, I don't want to sell anything, but if pushed into a corner I will throw the towel in, there's enough value in my portfolio even after CGT to see my wife and myself out in comfort
Hope is not a course of action & expecting the Govt to change course may be beyond even hope!
I am selling & taking the hit on CGT - its never going to be reduced & after tomorrow may be even worse :( . At least I've got time to invest it elsewhere & make some money without paying CGT.
Until we know what the budget is all about I can't formulate a plan. Section 24 needs to go, but of course it will not.
If they raise CGT too much I will sell more than I had originally meant to sell. There is no way that I will do all the work I do for 60% of any increases I get, minus the 40% that I pay off the mortgage amount etc. I will completely pay off one or 2 mortgages and then this will be my pension in a few years.
I've had a good run with being a Landlord, never thought we would have such short sighted incompetent MP's in power.
In less than 24 hours we will know more!
I guess the only worrying unknown is Labour, they will be our government in 2 years time…. Some of the talk from them is scary.
Beyond ridiculous that we have all been carolled into this unjust position, with no rhyme or reason to it, let alone any justification!!!
The pressure dealing with the drastic reduction of our BTLs is awful, along with carrying out necessary decorating and remedial work to unreported damage in preparation for the sales market, for each house. All this in the knowledge we will be hit with massive CGT!
We cannot see any light at the end of this ‘contaminated tunnel’ hence our decision, but, we are keeping a couple of BTLs, just on the off chance ‘Section 24’ is dropped, they keep their hands off ‘Section 21’ and the ‘
White Paper’ is thrown in the bin.
I can't see any change coming with sec 24, sec 21 will go maybe we'll get something in it's place, items within the white paper could change as it goes through government and the house of lords, so for me it's still a wait and see, but I'm not holding my breath either
My plan was always to consolidate down to my best 3 or 4 best performing properties, unencumbered so S24 doesn't play a part in my life. They're all well performing HMOs in high demand so I'm sticking to the plan (so far). S21 less of an issue for me although the ban on fixed term tenancies will be challenging. I'm at that point in my life where I've started dealing with IHT so I'll be keeping a close eye on what they do in that space tomorrow
Labour is coming in 2 years. The party with the red rose as opposed to the Labour Party with the blue tree.
Can taxes and regulations be worse under them?? It’s difficult to see how. But perhaps not worth waiting for.
Things are getting worse and worse and will take many years to swing back from the Rent Act era to the AST type era.
Great reset unfolding. Only radial change of new political party ( not labour) will get rid of woke nonsense.
Well said!
I have already sold one recently and waiting for the tax year to change, then sell another one and so on. After 37 years in this game, for me time is up. I speak two languages and boatful of refugees coming to shores. By phone interpretation every two hours 5 days a week I make more money than renting a two up two down in Stockport. NO repairs, no void periods, no rent arrears, no tax (well a little bit) and no legislations. I am out.
Nice.......... that is the way to go, wish i could speak any other tongue, just about mastered English,
Fery, so sad to see so many thousands of long term well established mature landlords being forced out after their decades of service and dedication to Private Housing Sector its plain wrong.
Michael I have seen it all in my days. Back in early 90s I used to pay mortgage at the rate of 17.5% , 3% above BoE base rate of 14%. But even then, Ok times were hard, but we were in control of our assets. Under the proposed legislations, we are going to lose that. Repealing Section 21 will take the control out of our hands. That is why many landlords like myself, exiting the industry.
Fery, exactly how it was usually 3% above base rate I was never paying below 8% back then with Commercial loans, savers were doing well at the same time. I think it was Woolwich that started all this buy 2 let as they called it, BoE dropped the base rate too low abolishing Savers the rest is history, the place was a wash with cheap money. Some bought with interest only Mortgage’s less than 1% ending up with hundreds of Properties anywhere all over the Country not running a proper Business like us where we looked after our Property and the Tenants but we are not thanked for it. Those guys are now the big landlords and won’t be involved with S24.
The small landlords are now picked on it sad really.
The straight forward commercial loans of the 80s & 90s worked well for me back then, I remember that I fixed one at 11% just as interest rates dropped and the bank manager wouldn't let me pay it off, so even with interesting rates rising now they are still peanuts to what we were paying then, although on much smaller sums of money
Andrew. Our earnings were very low too but we didn’t have Broad Band Contracts, Computers, iPhone, sky tv contracts all expensive and burdensome we were able to live fine without any of this people happier too, just add the unnecessary money now spent on take away food making them like pumped up balloons, if you were to put all that money mentioned above into your saving Account with your regular savings you can still easily buy your house with a bit of hard work 7 days a week like we did and some self denial. Anyone who think our generation got it easy think again.
Mike, mine was BDL so called Business Development Loans. That was with NatWest. Which was recipe for disaster and bankruptcy. But through hard work and proper management, we survived. The main thing was, we were in control. And that was why we pulled through. Now with comedians like Michael Gove, who wants to tilt the balance in favour of the tenants, in order to win votes, and Labour win on the horizon, I guess the best and the wisest move, bearing in mind that I am in my pension days, is to get out gracefully.
For good measure leave out the fags and alcohol. I didn’t drink when I was saying and never smoked.
I'm so annoyed about all this legislation coming. It over regulation . The cowboys will continue to be cowboys. The decent landlords will sell up
Crooks and criminals always operate under the radar.
Absolutely on the nail, plus poor enforcement of the existing laws.
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