Landlords are increasingly pessimistic about the Labour government, despite the fundamentals for the private rented sector remaining robust.
That’s the verdict from mortgage specialist Pegasus Insight which says a study shows 91% of landlords questioned believes the new government will be negative for landlords. Higher taxes and costs, anti-landlord bias and loss of control over property and tenant selection are the key worries.
Landlords are most concerned about changes to Capital Gains Tax in tomorrow’s Budget (85%), rent controls (79%), the removal of Section 21 powers (73%), mandatory landlord licensing (54%) and stricter energy efficiency targets (51%).
If tomorrow’s Budget hammers landlords on Capital Gains Tax, 39% say they would not invest further in the private renting; approaching 20% would exit the market; 37% would sell or consider selling some properties.
Only 6% of landlords say they plan to expand their property portfolio in 2025, while 41% mean to sell at least some property next year.
Leveraged landlords with outstanding buy-to-let mortgages are more inclined to sell (46%) than those owning outright (34%).
More optimistically, some 79% of landlords report strong tenant demand where they let. The upward trend in rental yields continues, reaching a 10-year high of 6.5% on average in Q3. And 70% of landlords say they are making a small profit on their rental property, while 17% are managing to turn a ‘large’ profit.
Mark Long, director of Pegasus Insight, says: “This research reveals the depth of concern over the attitude and potential actions of the new government when it comes to the treatment of landlords. This concern is all the more striking given the strong evidence that the sector is in fact thriving, despite the challenging environment it has recently weathered.
“The chancellor would be wise to heed the warning that imposing a heavier CGT burden on landlords could result in quarter of them increasing rents immediately and a sizeable reduction in the number of properties in the PRS in the near term, leading to yet more rent rises as the supply/demand imbalance worsens over the longer term.
“The PRS is vital to the housing needs of the nation, and it is crucial that this government offers reassurance and support to the landlords who provide homes for almost 20% of our population. Let’s hope this week’s Budget provides landlords with more reasons to be cheerful and confident in the government’s approach for our Q4 report on Landlord Trends.”