Landlord confidence in UK property market hits new low

by Gary Whittaker

Changes to how landlords are taxed at various stages of their investment are having an effect on the confidence they have in the market, according to new research, which suggests it is now dropping. 

At the start of this month, landlords had to start paying three per cent on top of standard Stamp Duty charges when investing in new stock, adding thousands to the cost of buying rental homes. On top of that, next year will see new laws come in that means landlords will not be able to deduct mortgage interest from their taxable income. 

According to online letting agent PropertyLetByUs, these two hits combined have meant fewer landlords looking to invest in the market, and some even thinking about backing out. It said that five per cent of landlords have already sold stock they might otherwise have kept, while six per cent are considering reducing their own portfolio size in the coming months by offloading homes. 

In addition to this, 43 per cent are looking at making their rental operation a limited company in order to avoid these increased rates of tax in the future. 

This is in spite of the fact that landlords are still enjoying a really strong rate of income at the moment. Demand is high and the returns landlords make remain favourable, with only one in six seeing a drop in their income in recent months.

Looking forward, many also appear to have plans in place for offsetting the cost of increasing taxation, with rising rent prices looking likely to be the most popular method landlords use to keep their returns at consistent levels. 

Mark Long, director at BDRC Continental, said it's not just landlords that have concerns, however. Tenants could see a drop in rental supply if landlords pull out of the market, which would be bad news for prices. 

"Many private landlords in Britain are really concerned about the impact of the 2015 Budget when tax relief on private rental properties was cut, and given the housing shortage, the potential knock-on effect on renters and the supply of rental homes is something that we all need to care about," he said.

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26-April-16Legal News