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Reduced Tax Relief is Major Reason for Landlords Looking to Sell
This article is an external press release originally published on the Landlord News website, which has now been migrated to the Just Landlords blog.
The Government’s reduction in buy-to-let mortgage interest tax relief is a major reason for half of all landlords currently thinking of selling their rental properties, according to a recent sentiment survey from Your Move and Reeds Rains.
Reduced Tax Relief is Major Reason for Landlords Looking to Sell
The tax cut, to the basic rate of 20%, was announced in the summer Budget. The study of over 1,200 landlords revealed that at present, 9% of landlords think that now is a good time to sell, with the tax changes affecting their decision more than any other factor.
Many landlords believe that renting out a property will become much less profitable when the reforms are gradually enforced from April 2017. As a result, they are now considering leaving the private rental sector.
This lack of confidence dampens the positivity of 31% of landlords who believe that now is a good time to purchase buy-to-let properties. In total, two-fifths of UK landlords (44%) think that investing in the sector is more complicated than it was six months ago.
This sentiment is due to stricter regulation, also introduced in the Budget, which includes the requirement for landlords to check the immigration status of prospective tenants. Around a fifth (19%) of landlords are daunted by this task and say they feel unequipped to let their properties without a letting agent to manage their investments.
Almost a quarter of respondents (24%) think the legislation surrounding the lettings sector has become more confusing, with more than one in ten (11%) stating that they don’t fully understand current regulations.
It is clear that these changes in landlord law are hitting investors’ confidence; general disenchantment with the lettings industry was a key factor for 23% of landlords that are looking to sell.
Director of Your Move and Reeds Rains, Adrian Gill, says: “Landlords could be forgiven for feeling a little deflated at the moment and it’s worrying to see this may motivate many to reconsider their investment. The Government’s tax changes appear to be making investing in buy-to-let less attractive because of the seemingly smaller profits margins on offer in the future.
“If a tenth of landlords do decide to leave the industry, this would seriously shrink the number of properties available for tenants. At a time when tenant demand is only rising, shorter supply will only translate into increased rents. This may mean landlords are underestimating the likely pace of future rent rises.”
He believes: “The Government needs to cut the red-tape involved in providing homes for renters if they hope to maintain a healthy supply of rental properties. With the Bank of England (BoE) keeping a wary eye on the buy-to-let market, further regulatory interference may only make landlords’ and tenants’ lives harder. We need landlords to stay in the market and invest further in the sector, in order to match future demand.”1
Are you considering leaving the sector? If so, what are the reasons for this?
