Please Note: This Article is 4 years old. This increases the likelihood that some or all of it's content is now outdated.

Buy-to-Let Prospects:

Despite the government’s tax changes, countless new regulations, and threats to the shorthold tenancy, with the proposed introduction of a mandatory 3-year tenancy, landlords are still optimistic about buy-to-let.

The saving grace is the growth of renting and the continuing healthy demand for rental accommodation. Recent research by Hamiltons International forecasts the sector to continue growing and reach six million households by 2025. By 2022, 20.5% of households will be renting in Great Britain, they say, up from 19.4% today

A new sentiment survey by Your Move interviewed almost 1,100 landlords in June this year and its survey report shows that around 52 per cent of landlords surveyed felt positive about their position in the current economic climate. This compares to only 16 per cent who felt negative about their prospects as landlords. The majority approach to the general outlook was confident, despite the stricter regulatory and tax changes introduced over the last couple of years, including:

  • Stamp duty rules were reformed, with the government introducing a 3 per cent surcharge on second properties in 2016.
  • Mortgage tax relief being gradually cut from higher rate relief available in 2016 to 20 per cent by 2020.
  • Prudential Regulation Authority (PRA) last year introduced more stringent affordability and much stricter underwriting rules for lender when financing mortgages for portfolio landlords. Under these changes, landlords with four or more properties are now classified as portfolio landlords, and subject to the new standards.

The Your Move survey found that around 64 per cent of landlords were unlikely to sell a property over the next 12 months, suggesting they presume, shows that most landlords are taking a long-term view.

The survey highlights that costs predominate as the landlords’ biggest concern: keeping costs under control such as maintenance and letting costs landlords view as the best way to safeguard their bottom line – over 80 per cent cited these as priorities.

Most landlords saw Brexit as being low down on their list of concerns, with only around 32 per cent asked about its effects on their business considering Brexit at all as a factor.

Director at Your Move and Reeds Rains national lettings, Martyn Alderton, has said:

“Given the number of regulatory and tax changes in the buy-to-let market over the last few years, it would not be surprising if landlords felt some trepidation about the future.

“It is great to see that the landlords we surveyed do, for the most part, remain positive about the future.

“Our research shows the majority of landlords are in it for the long term and that is important for the well-being of the private rental sector, providing much needed homes for those who cannot yet afford, or do not wish to purchase due to lifestyle choices.”

Adding support to the Your Move conclusions, mortgage lender Foundation Home Loans told the FT that they recently found “18 per cent of UK landlords expect to remain a landlord indefinitely, unperturbed by tax and regulatory changes.”

Managing director at Foundation Home Loans, Jeff Knight, has said that whilst positivity has grown, he believed that from a mortgage lender’s perspective, there was still some uncertainty driven by the unknowns surrounding the market.

“More than most of the hurdles facing landlords, the PRA changes changed the way in which buy-to-let mortgage applications are underwritten for portfolio landlords.

“One of the aims was to ‘push out’ so-called dinner-party landlords and professionalise the sector – tellingly, our own research found three quarters (74 per cent) of portfolio landlords questioned would now class themselves as a professional landlord.”

However, there are still those landlords buying for cash, perhaps from an inheritance or a business sale. So there are other sources of rental property coming to market, not dependent on landlords taking out mortgages, and this partly explains how the sector can keep on expanding, despite some landlords selling up.

Please Note: This Article is 4 years old. This increases the likelihood that some or all of it's content is now outdated.


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