Data published by a leading estate agent shows how much the buy to let sector has changed in the last three years. As predicted by many experts, a large number of smaller landlords have left the sector and there are now around 160k fewer rental properties.
Back in 2017, there were 2.8 million landlords. Today, that figure has fallen by 220k. The loss of so many landlords, and by extension, private rental properties, is a concern. Fewer homes mean higher rents, which makes it harder for people at the lower end of the market to find affordable accommodation. Yet this is what many experts predicted would happen when the government introduced tax and regulatory reforms that directly targeted landlords.
Level the Playing Field
The buy to let sector was at its peak in 2016/17 and many first-time buyers were finding it difficult to buy an affordable home. In a bid to level the playing field, the government introduced a series of changes, including phased cuts to mortgage interest tax relief and changes to capital gains tax rules.
Many smaller, accidental landlords were hit hard by the changes, which prompted them to leave the sector. Today, data from Hamptons reveals that the number of professional portfolio landlords has increased, with 30% more landlords owning more than one property. Landlords in the north own an average of 2.03 homes and landlords in London own an average of 2.01 properties.
As landlords have left the sector and the number of rental properties has declined, rents have risen by 3.6% in the last year, which is higher than the current rate of inflation. It’s cheaper to rent a property in the north, where rents are currently around £640 a month, on average. In London, rents have risen by just over 4% and tenants there pay on average £1783 a month.
Making a Profit
It’s not all doom and gloom. Landlords can still make a profit if they manage their portfolios carefully. House prices outside of London and the South East are a lot more affordable, so rental yields are higher. Heavily geared landlords will be impacted by the loss of mortgage interest tax relief, but there are ways to mitigate your tax liabilities, for example, incorporating. It’s definitely worth consulting with an accountant if you’re unsure of how best to structure your buy to let business – most offer an initial consultation for free.
If you are struggling to make a profit, examine your outgoings and see where you can save money. For example, it might be more cost-effective to manage your own portfolio, rather than paying a letting agent. Landlord software can help you keep track of your responsibilities and cash flow, which will save time and headaches.
Are you thinking of leaving the private rental sector? If so, get in touch via social media and tell us why. Or, if business is booming, share the secrets of your success!
Read More Like This:
COVID-19 Rent Reduction Refused for Group of London Tenants
Coventry Council Pushes Ahead with Landlord Licencing Scheme Despite COVID-19
Retail Landlords Under Increasing Pressure from Covid-19