Buy-to-let 

One in five buy-to-let landlords plan to sell up

One in five buy-to-let landlords plan to sell up

The ongoing changes to the tax treatment of buy-to-let investments and ongoing economic uncertainty mean 20 per cent of UK landlords are considering exiting the market, according to the National Landlords Association.

The trade body said one in five of its members plan to reduce the number of properties they own within the next 12 months.

The organisation said the additional 3 per cent surcharge for purchasing second homes, the banning of upfront letting fees and the changes to the tax treatment of buy-to-let investments prompted landlords to consider reducing their exposure to the market.  

Mike Heynes, head of private client at accountancy firm RSM, said of those three, the changes to the tax regime were having the greatest impact.

He said: “Even a half a per cent movement in interest rates could mean that the investor is losing money.

"Many buy-to-let investors are in the market for the capital gains, rather than the income, but house prices are falling in most parts of the country.

"If they invest with income in mind, then the tax changes impact on that, so there could be a crash in the property market if people decide property is not worth owning."

Changes announced in July 2015 mean that buy-to-let landlords can only claim mortgage tax relief at the basic income tax rate of 20 per cent, rather than, as was previously the case, at the higher rate.

This is being phased in gradually with the relief tapering off until 2021.

Mr Haynes added the potential for a future Labour government to introduce rent controls is another factor worrying buy-to-let landlords.

Ray Boulger, senior technical manager at mortgage broker John Charcoal, said: "The chancellor (at the time) was quite clever in the way they brought it in over several years so people didn't feel a hit immediately.

"Investors need to do their calculations very carefully, especially as there is likely to be very little rent inflation in the coming years as immigration is falling.

"Generally the new rules don't affect those landlords who haven't borrowed, but there could be a nasty shock for those that have a lot of gearing."

David Hollingworth, associate director of communications at London & Country Mortgages, said the major trend he has noticed among his clients is a rush to remortgage to lock-in the present low interest rates.

He said the changes mean landlords have to more aggressively manage their properties in order to achieve a return.

david.thorpe@ft.com

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